Research On Investor Decision Behavior In Chinese Security Market

From unusual phenomenon of security market, such as Reversal Effect and Disposition Effect, decision of investor is irrational. And Set of individual investor irrational behavior cause unusual price fluctuation which increase the risk of the security market. So it's necessary to carry on further research of investor decision of behavior, to find out formation mechanism and law of investor decision, which can promote the sound development of the security market. Behavior finance that rise in recent years, break through traditional financial prerequisite which supposes investor are rational risk-avoided and utility-maximized. The subject brings psychology into analysis of investor behavior, which is close to realistic limited rational investors, and offers a brand-new prospect for analyzing investor's decision behavior. The thesis applies financial behavior theory to study investors'decision behavior in China's securities market. When analyzing investor decision-making process, more attention is paid to the formation mechanism of behavior deviation at first. Processed information can be divided into in 3 stages :(1) obtained course when availability bias and selective bias happens; (2) processed course when emotion excite bias and frame dependence happens; (3) output course when excessive confident, attitude to new information, regretting aversion and herd behavior happens. Based on investment decision theories (prospect theory, behavior portfolio theory, BAMP), the paper analyses investor's decision-making process and 4 characteristics, including influence factor complicatedness, irrational decision-making, gaming behavior and psychology influence. Then, through investigation and analysis of investor's decision behavior correctly, this thesis finds out the individual investors of China's securities market have alternative bias, excessive trading, policy dependence bias etc., and explains the reason why biases produce. The paper makes an positive examine of the effects of herd behavior in security markets of Shenzhen and Shanghai in 1998-2005 using CSAD method, which finds there exists obvious behavior of herd behavior of investor's in this period. The conclusion that really there exists irrational decision behavior has been verified in terms of investor's group. Finally, the thesis uses the behavioral financial theory to put forward the pointed investment tactics to investors in China's securities market, for instance, decentralized time and cost average tactics, etc. It also proposes policies for securities supervision department, for instance, strengthening investor education, discoursing information , establishing investor protection mechanism ,etc. The structure of this thesis is arranged as follows: Chapter one: Introduction. At first it explains the background, meaning and purpose of the paper. Secondly through analyzing the domestic and international trends about financial research of investor's behavior, the chapter proposes the thinking of research and method of this paper, finally it summarizes the possible innovation of the thesis. Chapter two: Forming of the decision-making process of investment and behavior deviation. Information is divided into a series of stages in the course of cognition, namely information is obtained, processed and output, this chapter analyze psychology and behavior deviation of investors that formed in information processing in three stage separately, thus set up the theory frame that is used for explaining investor's behavior. Chapter three: Decision theory and model of security market investment. At first this Chapter introduces investor decision behavior theories and models in behavioral finance, then analyses the forming process and characteristic of the investment decision , finally explains investor's behavior anomalies with the decision theory of investment. Chapter four: Questionnaire analysis of the individual investors of China's securities market. Through the analysis of questionnaire investigation which were carried on 7 stock exchanges in Xi'an, the paper finds that the behavior of securities investors has inclination of the obvious irrational behavior, the profound reason of this kind of state is a deviation on all sorts of psychological and behaviors deviations of investors. The state aggravates the enlarging of the fluctuation of the market and market risk. Chapter five: Positive research of the herd behavior of investor of security market. The chapter uses CSAD model to examine the herd behavior effect in Shenzhen and Shanghai security exchanges separately, find that there is obvious herd behavior in both exchanges. Chapter six: Individual investor's investment tactics analysis. Firstly this chapter analyses the investment tactics of the behavioral finance. Secondly it introduced the application of investor's investment tactics in China's securities market. Chapter seven: Some policy suggestion. This chapter offers the policy suggestion to individual investor and supervision departments. Possible innovation of the thesis:1. Using the behavioral finance theory, the thesis summarizes psychology characteristics of decision of Chinese individuals investor. 2. The thesis examined the security exchange of Shanghai and Shenzhen in 1998-2005 respectively with CSAD method by large sample data, which finds out that there is obvious herd behavior. 3. According to the financial theory mode of the behavior, the thesis divides Chinese investor tactics into two groups---income-oriented tactics and behavior-oriented tactics.