| During more than ten years of development, there is great progress in Chinese security market. With more and more companies are listed, more and more products are traded, better and better investor structure is established, the security market powerfully drives this country's economy up. But behind this, all kinds of illegal acts that influence the deeper development of security market often appear. The rat trade is a special representative among these acts. The rat trade in security market has been detested by the broad investors. Especially after some fund managers'rat trade was disclosed in 2007, the whole market gives more attention to this action.Essentially, rat trade is one insider trade action based on the trade-manipulation. Although people have realizes this action for many years, it is very difficult to use common economic research method to analyze rat trade, because the institutional investor breeding rat disobeys the rational decision-making to maximum the expectational utility. Furthermore, because the process that institutional investor breeds rat is very covert, the identification of rat trade is a hard work. These two factors cause that there is just qualitative analysis about the rat trade, not quantitative analysis and empirical study.In this dissertation, after having summed up the literatures of investors'trade behavior and asset pricing, aiming at the institutional investor turning its preference to the rat's utility and the difference of belief about asset future return among investors caused by rat trade, respectively from the viewpoint of the game among investors, from the viewpoint of the relationship between the return of rat trade stock and the return of the market portfolio, from the viewpoint of imperial investment-consumption and market equilibrium, the author analyzes the effect of rat trade on the security market. This research method for rat trade based on the viewpoints of investor's intentionally violating rational decision-making and different beliefs on asset return among the investors gives a new view to study the feature in security market.The main work and conclusions are as flows: 1. We sum up the literatures of investors'trade behavior and asset pricing, including game theory, moral hazard theory and asset pricing theory. At the same time, we summarize the game feature and list the main game types in Chinese security market. Furthermore, we gather up the reasons that cause moral hazard behavior in security market.2. By employing the rational expectation equilibrium method, we construct a single period game model including the rat, the institutional investor and the other individual investors. First, using the institutional investor's moral coefficient, we describe its preference shift, and we use the volume of rat trade as the noise source. Second, according to the investors'utility function, we conclude their trade volume and the market price of risk asset under equilibrium. Furthermore, we analyze the market welfare under equilibrium and rat trade's influence on the stock price, volume and volatility.3. By employing the rational expectation equilibrium method, we construct a multi period game model including the rat, the institutional investor and the other individual investors. Furthermore, we analyze how the information about risk asset value sinks into the price and the change of market strike coefficient caused by rat trade.4. By employing the rational expectation equilibrium method, we construct the game model including the rat, multi institutional investors and the other individual investors. First, we work out the analytic formula of price under market equilibrium and study mechanism of the equilibrium. Second, we study the effect of the moral coefficient of the institutional investor for rat and the number of other institutional investors on the market equilibrium.5. We study the return feature of rat trade stock. First, because the institutional investor assigns more weight to the rat trade stock than to other stocks, we use the utility discount rate to describe the institutional investor's choice. At the same time, we analyze that the rat trade deepens the information asymmetry among the investors and affects their investment decision. Second, we resolve the investors'utility function and get their optimal investment portfolio strategy, and work out the analytic formula of rat trade stock's abnormal return. Furthermore, we analyze the effect of institutional investor's weight, utility discount rate and the degree of information asymmetry on the abnormal return.6. We study the intertemporal investment, consumption and the market's risk premium under equilibrium when existing rat trade. First, because the institutional investor's utility is decided not only by its own consumption, but also by the rat consumption, we use the utility diversion coefficient to describe the institutional investor's choice. At the same time, we analyze that the rat trade produces different beliefs on asset return process among the investors. Second, we resolve the investors'optimal investment-consumption strategy and make a compare to the situation without rat trade. Furthermore, we work out the analytic formula of risk premium under market equilibrium and analyze the factors that affect the risk premium.7. We make some empirical studies on the rat trade in Chinese security market. First, we describe the moral hazard actions such as rat trade in a general way. Second, using the trade data from one security company branch in 2007, we testify the effect of rat trade on stock price, return rate, liquidity and volatility. In order to testify the rat stock cross-sectional return model described in chapter 5, we use the rat stocks punished by China Securities Regulatory Commission (CSRC) to make an empirical study, and the result proves the existing of the abnormal return. Furthermore, In order to testify the model about risk premium under market equilibrium caused by rat trader described in chapter 5, we use the stock price index, interest rate and month-consumption data from 1993.7 to 2007.12 to make an empirical study and get a sound risk aversion coefficient and resolve the equity premium puzzle.The primary innovations in this dissertation are summarized in the following.1. By using the rational expectation equilibrium method, quantitatively study the rat trade from the viewpoint of market micro structure. By employing the volume of rat trade as noise source, construct the game model including the rat, the institutional investor and the other individual investors. By using the institutional investor's moral coefficient and defining the object function of institutional investor as the linear combination of its own gain and the rat's gain, describe its preference shift artfully.2. By generalizing the rat trade model to the multi period situation, study how the market price reflects the dynamics of the information of asset value and the relationship between this dynamics and the volume of rat trade. Discover that during the multi period rat trade, the less volume of rat trade in the first periods can help to conceal the motivation of breeding rat, with the increase of the trade time, the rat can enlarge its volume to make more gain. 3. Study the cross-sectional return feature of rat trade stock and the factors that influence the return. By employing the utility discount coefficient, describe the institutional investor's preference that is assigned more weight to the rat trade stock than to other stocks. At the same time, analyze the error of investor's expectation to the asset future return caused by the rat trade. Work out the analytic formula of rat trade stock's abnormal return under these two factors condition. This is a development to CAPM under rat trade condition.4. Under continuous time frame, study the intertemporal investment, consumption and the market's risk premium on rat trade condition. By using the utility shift coefficient, describe that the institutional investor's utility converts to the rat's consumption. At the same time, analyze the difference of belief about the risk asset return process among investors. Work out the strategy of investment-consumption and analytic formula of the risk premium under market equilibrium. This is a development to CCAPM under continuous time frame.5. Make some empirical studies on the rat trade in Chinese security market for the first time. From the viewpoint of market micro structure, testify the effect of rat trade on the stock price, return rate, liquidity and volatility. From the viewpoint of cross-sectional return, prove the existing of the abnormal return. From the viewpoint of market equilibrium, testify the mode about market risk premium and get a sound risk aversion coefficient and resolve the equity premium puzzle.
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