| The year2005was the milepost sense year of China security market in the history,before the share-trading as the special and institutional defects of our country’s sharemarket have long-term plagued the development of the market, in the year2001thegovernment tried to take administrative measures caused the stock market up to5years of irrational fall, which almost resulted in the Chinese security marketretrograding to the start again; April2005after the quiet years of the securities market,the market was activated by the equity division reform. Investors with greatenthusiasm created one of the largest carnival in the securities market of China. Bythe end of2007when the equity divison reform completed, the Shanghai CompositeIndex was soaring from the lowest points of998up to a maximum of6124points.However, good times did not last long. The share market in China experienced moreintense fall and jump again entering a bear market. Although experienced externalshocks of United States sub-loan crisis which led to the global financial crisis and thedebt crisis, China economy still maintained high growth level. At the end of2011,when the GDP of our country grew from less than RMB10trillion ten years ago tonearly40trillion and the listed companies increased from the1073growth to2300,the Shanghai Composite Index fell back to the points ten years ago. After Carefullyobserved the index and stock volatility, the secondary market investors found thatbesides the fundamental factors of corporate, there was a noticeable new forces,namely with the full circulation times came true, the non-tradable stockholders andcompany’s high executives fiercely sold their shares, and the point was that the timemajor shareholders reduced the stocks occured frequently when good informationrelease or before the bad information out, and the holdings of shares was oftenaccompanied by subsequent good information. Even in order to avoid reduction ofshare system constraints, large number of executives quit their jobs. Then with thedramatic transformation of market style, the stock market speculation was popularagain. The large blue chip companies with good corporate governance and stableprofits was abandoned by investors, on the other hand, short-term trend tradingbecame the best ways to make profits and evade risk, and the public and privateequity funds aimed at long-term investment value were often recognized as theobjects of satire as a result of the poor performance. A large number of secondaryshare market’s investors reckoned the reform of equity division neither brought a fairand effective market nor realized the win-win situation between the minorityshareholders and majority shareholders, therefore they lost the confidence of stockmarket and required the authorities to adopt a new system reform. At present, China’s regulatory authorities and institution scholars do not haveobvious differences on all sorts of problems of China’s securities market and therelated policy suggestions also appears to be highly consistent. The capital market ofour country is emerging in the immature market, implementing market-orientedsystem construction is to establish a perfect and effective capital market gradualprocess, which take some time to move toward maturity gradually. In principle, thisarticle is not dissent this conclusion, however under the condition of no overallsystem arrangement such as lack of effective restriction of insider informationexchange in our share market, partially improving the reform measures often fail torealize the goals. Although the equity division historically solve the chinese capital onthe market with different stock price, and legal person shares non-circulationproblems, compared to the legal person share non-circulation time, the non-tradableshares converted into conditional shares also created a system is expected to be moreclear the insiders. These internal traders hold absolute majority of proportion ofcirculation stock’s market value, and compared with outside investors naturally theyhave internal information advantages. Due to the limitation of current stock in certainperiod will be gradually circulated, besides state-owned must hold the controllingright, a large number of non-state-owned controlling shareholders create highreduction opportunities or manipulate stock price fluctuations high possibilities,which may be the cause the chaos phenomenon after a series of reformation ofChina’s securities market. To find out this proposition, there are two deepen researchdirections, the first one is to test whether under the condition of lack of restrictionmechanism, the existence of internal traders will lead to capital market chaos furthermore outstanding; the other one is how to make a further supporting system reform,which may effectively eliminate the institutional formed and clear expected profitreturn internal traders. Apparently the first research direction is to search the crux tosolve the basis of proposition, so this paper chooses it as the breakthrough, namelyverifying the correlation of internal transactions and the stock market rises and falls,and the effect of internal transactions of securities market operation for the innermechanism. This paper try to start the research work from a new perspective, and usethe new financial theory frame which is different from traditional classical andeffective market theory. That is through the theoretical description of the differenttypes of investors’ behavior in China’s stock market to analize all kinds of investorspursuing the maximal profit when its investment behavior and groups changed, andfinally inference the internal reason of excessive volatility of our share market. Thispaper’s reasoning process is divided into several parts: a brief review of the marketfrom effective static linear theory to the nonlinear dynamic model chaotic markettheoretical paradigm shift, and on China securities market research significance ofChinese characteristics; By using the chaos theory to verify the nonlinearcharacteristics of China securities market and the change of market characteristic before and after equity division reform; Constructing China’s securities marketnonlinear model of heterogeneity investors; According model test of therepresentative behavior of investors, the endogenous mechanism of the Chinesesecurities market price fluctuation is verified.After1970years, efficient market theory (EMH) has long time dominated thetheory research of financial economics. Effective market core meaning is that assetprice change fully reflects the market information, asset prices is the externalperformance of the intrinsic value. In the short term, the external random factorscaused volatility of the asset prices is unpredictable; Shares’ deviation in thelong-term will return to the fundamental value of the mean economics. The level ofrisk assets can be measured by fluctuations in the price variance; the normaldistribution statistical of the assets’ present price of time series strongly support thecapital market system effectiveness and risk control. And the existing conditions ofthe above all can be controlled is that the stock market investors are rational.Effective market theory since it becomes the rule has been suspected and challenged.First of all because. Jordan Fama (Fama,1965) found the famous Fat-tailphenomenon, Sterge (Sterge,1989). Turner (Turner) and Weigel (Weigel,1990)confirmed the Fat-tail phenomenon is far from occasional, and the local commonphenomenon. With the development of research, economists in small company effectgradually. Scale premium. With the development of research, economists define andreveal the economical meaning of Fat-tail phenomenon though the small companyeffect, Scale premium, Value premium, Persistence characteristics and excessivevolatility and the cluster of volatility of the stock price. Small probability events of‘Black Swan’ phenomenon in the Asian financial crisis caused extensive dominoeffect, and in2008the subprime crisis caused the global financial crisis, are furtherprove that the Fat-tail phenomenon produced the destructive power in reality isdifficult to discover and can not be controlled.Shiller (1981,1984,1987) revealed the intrinsic link between the non-rationalinvestment behavior and a peak fat-tail phenomenon, that is when the most investorshave cognitive biases in investment decision-making, their behavior willsystematically deviate from economic rationality, which could cause the financialmarket deviating from the effectiveness strikingly for a long time, resulting in theturmoil or crisis in financial market. Shefrin(2000) described that the investors relyon simple and habitual method and experience to make their investment decisionswith the limited rational hypotheses; Thaler put forward quasi-rationaliyt, thisconcept analyzed some emotions, such as over self-confidence and overreaction willlead to noncompletely rational behavior. Obviously, if investors are irrational,different types of investors would constitute decentralized and conflicting investmentactivities, at the same time, the market feature is fractal and the volatility of themarket is not linear but chaotic. Years ago these concepts are very unorthodox, nowadays there is a relatively perfect fractal market theory and a model of chaoticmarket theory. Because non-rational investors are heterogeneous groups, when theyare in the same market facing the same information, Some of them will have aexcessive investment response due to yield, while the others have nothing to do.Assumption that the proportion of investors who believe that this information hassignificant effect on investment income are higher, the result would be an unevenmarket, even if this information has little effect on investment income actually.Conversely, when most of them believe the information has no effect on investmentincome, the market’s response to the information would be delayed. Real question iswhen the effect is greater than the estimate in advance, investors will turn to overreact,which also can cause slump and boom. Further analysis showed that the overreactingand the delayed response are just intermediate state. In the real liquidity capitalmarket, the distance between overreaction and delayed response is only an investor’sidea.In a word, when economists free themselves of the thought that the price volatilityis the response of complete information, the real world they can see is, the pricefluctuation for the information is nonlinear, while the asset price change no longerfollow the process of random walk, so the typical characteristic of capital market ischaos. Furthermore, sensitive to initial conditions, non-cyclical and boundedness arewidespread phenomenons in capital markets. Since it is impossible to change thisnature of the market, what we can do to reduce the loss is only understanding thesefeatures.The paper adopts Fractal Theory and Chaos Theory to do the empirical research onthe securities market in China, proves that our securities market has the classicalcharacteristics of fractal market and price fluctuation is characterized by chaosobviously, and further verifies that non-linear characteristics of our securities markethave been more obvious since the reform of equity division. According to the resultsof the empirical test, we can see that the characteristic of Chinese securities market isthat it has more obvious fractal market and chaos properties by comparing withmature capital market of developed countries. The paper studies on properties offractal market and internal mechanism of chaotic fluctuation of capital prices on thisbasis.Firstly, it uses the comprehensive indexes which have been established byShanghai Stock Exchange and Shenzhen Stock Exchange for two decades and thetotal TTM price-to-earnings ratio as targets, undertakes the non-liner characteristictest on price fluctuation of our securities market and fluctuation of stock pricescorresponding to basic values, and confirms that fluctuation of comprehensiveindexes and stock prices deviating from internal values in our securities market hasthe classical chaos characteristic. China’s securities market has the characteristics including fractal market, random walk of price fluctuation, acyclic period andlong-term unpredictability of stock prices.Secondly, inspection results of non-liner dynamic model on dynamicprice-to-earnings ratio fluctuation nature show that heterogeneous traders’ dynamicexpectation on future income discount of asset is characterized by chaos, whichconstitutes the chaos characteristic of asset price fluctuation. Proving the importantindication significance of this internal cause and effect relationship on the research ondevelopment of China’s securities market lies in the fact that study on acts ofheterogeneous investment according to irrational logic is the key to understandexcessive fluctuation of our securities market.Thirdly, the relevant study on fractal market is based on classification ofheterogeneous investors. Although we can divide heterogeneous investors accordingto different classification methods in the theoretical study, the standard of judgingwhether classification is reasonable is whether investment act is defined moreaccurately which can be observed in certain period and has classical significance;meanwhile, whether statistical indexes which reflect this investment act effectivelycan be obtained is the important basis of classification. In the study works, we canclassify our securities investors as follows: the first type is insider information traderswho are criticized severely in China’s securities market, they trade by graspinginformation which isn’t publicized but has important influence on basic values ofstocks, and the classical representatives are large and small part of non-tradableshareholders, market makers and a few funds etc.; the second type is basic valuetraders, i.e. rational traders, who trade by judging basic values of stocks according topublic information, and the classical representatives are some privately offered funds,public offer funds and a few common investors; however, position traders, who canbe called as limitedly rational icon traders (including positive feedback traders andnegative feedback traders), who trade according to changing tendency of marketprices of stocks, and the classical representatives are most of common investors andsome company-offered funds.Fourthly, investment acts of the three different investors differ greatly, changes ofweight combination will make our securities market have different fluctuationmechanisms. Special attention shall be paid to mutual influence of acts of the threetypes of investors, and small changes of primitive conditions lead to enormous chaosphenomena of market fluctuation. Although we cannot know whether daily marketprices of stocks deviate from real prices of stocks in modern stock market, we knowthere are losing and winning investors; the three types of investors have differentdaily, monthly and yearly investment incomes, which form study process, moreaccurately, that is switching process of investment acts. For example, rationalinvestors hear that more people make profits by relying on insider information, andthey might give up choices of rational investment. However, changing investment act needs to pay costs, which are highly related to establishment of securities marketmechanism, and maturity of investors, and high switching cost makes impossibility ofswitching like a high threshold. For example, obtaining insider information needscosts, basic value traders must receive good education, they shall pay fees ofinformation collection and processing undoubtedly, costs paid by position tradersaren’t low, analyzing stock price trend chart needs knowledge of statistics and a lot oftuition in the market. In market of low-cost and prevailing insider trading, manyconditional investors will undertake low-risk and large-profit insider trading; andother common investors will predict implied insider information according totechnical indexes such as price variations and volume rate changes. The collectiveswitching act will change dynamic proportion to be invested by the whole society,and cause social market timing operation. Excessive reaction and slow switching ofinformation will become quicker, feedback trades become stronger because of stockprice changes, and special phenomenon of large price movement is formed in ourcapital market. To sum up theoretically, we can define it as dynamic chaos processthat investor acts cause non-linear fluctuation of capital prices and fluctuation ofcapital prices affects investor acts, which is two-way interactive attack. During theprocess, structural change of investors has the core internal influence on evolutionlevel (dynamic price-to-earnings ratio) of capital market and fluctuation of capitalprices or it is the internal factor for the making and development of the capital marketin China.Lastly, the relevant study on the chaos phenomena caused by random perturbationbetween heterogeneous investor acts and interactive acts in the micro-structure of ourcapital market explains that the starting point is excellent in the market reform of oursecurities market systems, but relevant imperfect supporting systems will formtortured micro-structure of market systematically, and lead to more chaotic marketwhich is effective irrationally. The conclusion of the study has an importantsignificance on the establishment of future systems of our capital market. |
PDF Full Text Request