Research On Investors Heterogeneity And Its Impact On Stock Market Volatility

After nearly 30 years of rapid development,China's stock market has now occupied an increasingly important position in the global capital market.However,compared with the developed markets in Europe and the United States,there are still some immature aspects in China's stock market,such as the imperfect information disclosure mechanism and trading system.In addition,the structure of participants in China's stock market is also significantly different from that of developed countries in Europe and the United States.A large number of individual investors are active in China's stock market,and these investors are vulnerable to the limitations of capital strength,information acquisition and analytical ability.Their trading is not entirely based on the analysis of fundamental information,but more vulnerable to irrational emotions.Therefore,in the same market environment,different investors will make completely different or even completely opposite decisions due to differences in resource endowment,risk preference,knowledge structure,information acquisition and analytical ability.The difference of investment behavior shows that investors in the stock market have heterogeneous characteristics.Thus,the structure of investors has an important impact on the stability of the stock market.According to Behavioral Finance Theory,the relationship between investor heterogeneity and volatility of China's stock market is of great significance to optimize the structure of investors and promote the stable development of China's stock market.In this paper,Evolutionary Game Theory is used to analyze the path choice of heterogeneous investors in the evolution process and the evolutionary stabilization strategy of the system.According to Behavioral Finance Theory and Information Asymmetry Theory,we measure the heterogeneity of investors,and then construct two mathematical models to study the impact of heterogeneity of investors on stock market volatility.By summarizing the measurement methods of investor sentiment indicators,we try different methods to measure investor sentiment indicators in China's stock market.Then we compare and analyse the characteristics and problems of these methods.Finally,we construct STAR-GARCH model and TVP-VAR model to empirically study nonlinear effects,time-varying characteristics and feedback effects of the heterogeneity of investors and volatility in China's stock market.We can draw the following conclusions:Firstly,there are different evolution paths of heterogeneous investors in different situations of the stock market,that is,there are many evolutionary stabilization strategies in the evolutionary game of heterogeneous investors.When in a bear market,the sentiment of noise investors is negative,with the development of the evolution process,noise investors gradually begin to withdraw from the market.When in a bull market,the sentiment of noise investors is positive,with the development of the evolution process,noise investors begin to occupy the dominant position in the stock market.In this situation,there are two final evolutionary equilibrium states: one is that rational investors are completely expelled from the market,leaving only noise investors in the market;the other is that rational investors and noise investors coexist in a specific proportion.Secondly,the heterogeneity of investors will increase the volatility of the stock market.All else being equal,the impact of fundamental analysis on volatility of return on risky assets is less than that of technical analysis.There is a positive correlation between the average speed of information dissemination and the volatility of risky asset prices in the process of risky asset trading.There is a positive correlation between the deviation of the end-of-term value expectation on risky assets and the volatility of risky assets prices.Thirdly,the heterogeneity of investors has significant characteristics of regionalization on the mechanism of Shanghai and Shenzhen stock returns.In addition,the impact of investor heterogeneity on stock market volatility has time-varying characteristics,and the time-varying characteristics of Shanghai and Shenzhen stock markets are basically the same.The feedback effect of investor heterogeneity on stock market volatility is consistent at different time points,but the time-varying characteristics of Shanghai and Shenzhen stock markets are not the same.From the perspective of the overall and long-term effects of the market,it can be seen that the heterogeneity of investors is negatively correlated with market returns and positively correlated with market volatility.