A Study On Anchoring Effect And Stock Price Anomaly

Traditional finance theory suggests that capital market investors are completely rational, the stock price is determined by the company's intrinsic value. However, Behavioral finance research found that due to the existence of cognitive bias allows investors to make rational decisions is often limited or even irrational. In other words, investors are impacted by the factors of psychological in information processing and decision-making process. In China's capital markets, the cognitive bias caused by market immaturity, inadequate laws and regulations as well as traditional culture make the limited rational behavior of investors become more prominent. Therefore, the growing recognition of this cognitive biases influence on the capital market becomes an important research questions.Based on the perspective of anchoring effect, this paper uses the listed companies of having Initial Public Offering (IPO) in China A share capital market during January 2005 to November 2010 as research sample, calculates Buy and Hold Abnormal Return (BHAR), and considers stock name, stock code and fundamental factors on the impact of abnormal returns. This paper establishes multivariate liner regression models to analyze the different anchor behavior could affect the abnormal phenomenon of stock price volatility. The paper founds that in the initial public offering, investors prefer stocks whose stock name contains a special word; investors prefer the stock codes which included special numbers. Further studies showed that, as investors understand the fundamental factors of the company, which will gradually return to rational cognitive bias, but still maintain a certain preference. This paper, in addition to investment decision-making meaning, of irrational behavior, efficient markets and investor learning ability and other aspects of research, but also has a certain significance.