A Study On Over-speculation Of China's Stock Market And Its Institutional Factors

A healthy stock market has very special importance to a sound economy. Since its establishment, China's stock market has seen a rather rapid growth and formed a fundamental mechanism in a comparatively short period of time. However, the over-speculation has become the main problem of the market and seriously hindered its further development. China's stock market has been depressing for quite a long time and the problems left over by history has become more and more serious now. It is high time for China to face and tackle them one by one, especially the problem of over-speculation.Finding out the crux is the key to solve the problem. Since the institution factor has a decisive influence on the men's preference and behavior, therefore, the paper holds that there is a positive relationship between the over-speculation and institutional factors of China's stock market. This is the starting and further developing point of the whole thesis.Since the nature of an institution depends upon its initial starting and the process it develops, the paper tracks the forming process of institutional factors of China's stock market and concludes the characteristics of them from the historical and logical angel. Directed by this main clue, the paper examines how the institutional factors magnify investors' cognitive bias, and how they results in the absence of investing value of listed companies. Both of them stimulate investors to over-speculate. The investors' over-speculation then contributes to the speculative nature of China's stock market. The above logic can be depicted as following "institutional factors â†' investors' behaviorâ†' market performance". According to the institutional factors of China's stock market and their influence on the market speculation, the paper concludes with several suggestions on how to achieve the institutional innovation of stock market in order to restrain the over-speculation.