Empirical Study On The Behavior Finance In Chinese Security Market

Behavior finance, traced back to 1950s, revived in1980s, is the advanced field of finance study in the Western countries at the present time. In China, the study on this aspect is also up and doing. The great significance of this theory is that, it absorbed the achievements of modern psychology study and enables the finance study based on practical supposes but not on strict and unpractical ones that modern finance theory is based on. So behavior finance ushered in a new era in finance domain.Up to now, the main limitation in the study of behavior finance is lack of systemic theory and practical model suitable for special situation of each country .So this paper aimed at these two aspects.Firstly, the origin and history of behavior finance was reviewed and comparison with modern finance theory was made, in aspects of principal, theory, model respectively.Next, according to the model of over-reaction, an empirical study on the policy effect caused by the execution of QFII mechanism was done. The results showed there existed a serious over-reaction phenomenon in Chinese security market. As a result, the policy effect, a very common phenomenon in Chinese security market, was introduced into behavior finance theory, in order to enrich and perfect this theory.Referred to those relevant theoretic and empirical achievements of behavior finance study, herd behavior was verified in Chinese security market. Then, the reasons for the existence of this phenomenon were analyzed and the control measures were provided. Compared with the American security market, the level of herd behavior in Chinese security market was much higher than that of American security market.At last, a fine prospect of behavior finance was assumed, especially in Chinese security market. Because of these immature characteristics of Chinese security market, behavior finance theory is much appropriate than modern finance theory in analyzing these special phenomena existing in Chinese security market, vice verse, these immature characteristics can also prompt the development of behavior finance theory.