The Forming Mechanism Of Financial Bubbles And Empirical Research On The Bubbles Of China's Stock And Estate Markets

The bubbling economy of Japan in later 1980s and the financial crisis of South East Asia in 1997 brought big negative influence to Asia economy and even the world economy. The bubbles in economy, especially the financial bubbles, have been taken into account by all countries. People should think: Are the problems occurred in Japan and South East Asia their own problems, or the universal problems that the whole world economy will encounter? Is the bubbling economy an inevitable stage in economic development, or the consequences of mistakes made by governmental policies, or the result of the both?Our country is in the course of the transfer from planned economy to market economy. With the rapid development of financial market and the ever-increasing expansion of the capital market, more and more bubbles have been accumulated in the economic body of our country, especially in the stock and estate market. If these increasingly expanding bubbles cannot be eliminated effectively and timely, the macro-financial risks will be greatly increased.The research of the financial bubble theory is a current issue. The theoretical research in this field is still on its early stage, and there are still many issues waiting for us to have a further study. It is obvious that the current situation cannot accommodate to the need of ever-increasing construction of the market economy. So, how to reveal the forming mechanism of bubbles, how to measure the bubble reasonably, and how to control the bubbles, all of which demand a systematic and explicit answer as soon as possible, which is also the starting point of this dissertation. The ultimate goal of this paper is to reveal the damages of financial bubbles through analyzing the forming mechanism of financial bubbles, and at the same time, to propose reasonable measuring criteria and effective controlling countermeasures of the financial bubbles by studying the stock and estate market situation in resent years. This dissertation consists four chapters. The first chapter is divided into three segments to clarify the forming mechanism of financial bubbles from three aspects-system, market environment and speculative instinct. The first segment explores the function of money system, credit system, stock and exchange system, and financial liberalization and internationalization system in the forming process of financial bubbles. Considering the uncertainty and dissymmetry of information possessed by the financial market, the second segment studies the function of market environment in the forming process of financial bubbles. The third segment analyzes the function of speculative instinct in the forming process of financial bubbles.Chapter two mainly analyzes seven damages to one country's economy the society done by financial bubbles--the damages to macro-economy, resources allocation, the function of capital market, the operation of financial system, illegal economy, income allocation and social customs Chapter three does empirical analyses on the stock market in resent seven years. This chapter includes four segments. The first segment introduces the general situation of our country's stock market, including total market value, circulating market value, the number of shareholders and market quotations. The second segment gives us three measuring criteria of stock bubble—P/E, bubble degree and bubble coefficient. The third segment points out that how our country should push forward the financial reform, how to control the money supply reasonably, and how to propel the process of the financial liberalization by studying the forming reasons of Japan's bubbling economy. The fourth segment puts forward six suggestions on how to control the stock bubble—setting up efficient measuring criteria of the stock bubble, controlling the money supply and credit expansion strictly, checking and approving the listing companies strictly to promote the quality of listing companies, establishing an efficient investment culture to ensure the successful operation of the stock market, encouragin...