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Stock Market Equilibrium With Heterogeneous Beliefs And Evidence From China Stock Markets

Posted on:2005-05-25Degree:MasterType:Thesis
Country:ChinaCandidate:Y J ZhangFull Text:PDF
GTID:2156360122987797Subject:Management Science and Engineering
Abstract/Summary:PDF Full Text Request
Heterogeneous is, briefly, the phenomenon that investors in stock market holddifferent opinions on price of risk assets. In common sense, people will agree thatdifferent investors will have different opinions on the price of the same risk asset. Butuntil the last two or three decades have academic researchers shed some light on thebelief heterogeneity between stock market investors. Now there are still a lot ofproblems to be solved within this area. Barberis and Thaler (2002) argue that belief-based models may offer a fruitfulway of thinking about some of the anomalous evidence. So the purpose of this essayis to do the research in the field of heterogeneous belief-based market equilibrium. With the assumption of investor rationality, short sell restriction andheterogeneous beliefs, I present a Heterogeneous Belief-based Market EquilibriumModel (HB-MEM). Accordingly, I divide the factors that affect stock price into twogroups, market factors and investor factors and document that, when there is noinformation which may have influence on the performance of the stock issuers, stockprice may also fluctuate. Based on HB-MEM, some consistent hypotheses arepresented to explain the anomalies of excess volatility, overreaction and IPO lowreturn in the long term. Two more empirical works are done to examine the efficiency of the HB-MEM.In chapter 4, the relation between volume and price is examined and support theproposition that the divergence of opinion is positively correlated with the price ofrisk asset. In chapter 5, monthly effect is found in china stock market, which in turnproves that the quantity (fortune) of investors is positively correlated with the price ofrisk asset. In the rest of chapter 5, I give some evidence on the existence of "yearly traders"in China stock market, based on which a new quantitative model is presented toexplain the unique monthly effect in China stock market in detail.
Keywords/Search Tags:Heterogeneous Beliefs, Equilibrium Model, Asset Pricing, Market Anomalies, the Relation between Volume and Price, Monthly Effect
PDF Full Text Request
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