The Analysis Of Stock Cross-section Abnormal Return And Investor Behavior

Since the theory of effective market and CAPM model has been proposed, they have a far-reaching impact on the relation between the research of return and risk in the finance field. Banz (1981) discovered at first the stock cross-section return is deposited in the size effect. After that, many research finds that beta coefficient is not remarkable in explaining the cross -section earning ratio of the anticipated stock, the explanation strength to investment combination earning ratio is very low, some " abnormal phenomena " of failing to agree with traditional theory appear instead: Such company characteristic variables (financial structure variable) as size, E/P , financial leverage , BE/ME ,etc. have very strong explanation strength to earning ratio, and dependence is very strong.This article reviewed from classical economic theory to study on investor's behavior of financial theory of the modern behavior at first, analysed the appearance of the abnormal phenomenon of cross-section return of stocks and the scholar' explanation emphatically, then combined with the actual conditions of China's securities market, demonstratively analysed the abnormal phenomenon of cross-section return of stocks of the domestic stock market, after drawing the conclusion that abnormal phenomenon existed in Chinese market, combined with the psychological research, analysed all sorts of psychology reacting and impact on investors that investors are in the equity investment behavior. Designed a kind of investor's sentiment substitute indexes model, which is used for assess the impact on abnormal phenomenon of investor's sentiment.At the end, the article draws the conclusion. First of all, the return of portfolio can't be only offered by systematic risk direction that beta value represents, company characteristic variable, for instance, company stock size earnings/price ratio, book/market value ratio, etc., all made the instruction function of excess return of the portfolio relatively to the market. The small company effect and E/P effect also existed in the domestic security market. Investors, as ordinary people, their psychological factor will play an enormous role to their behavior including investment behavior. The demonstrative research has verified investor's sentiment has significant influence on investors' investment behavior.