Font Size: a A A

Simulation And Empirical Research Of Bubbles In The Stock Market: Analysis Based On Noise Trader Theory

Posted on:2008-07-14Degree:MasterType:Thesis
Country:ChinaCandidate:L L LiuFull Text:PDF
GTID:2189360242979044Subject:Financial engineering
Abstract/Summary:PDF Full Text Request
The security market of one country is the main place for circulation of the capital. And the correctness of the pricing of the securities is the index of the maturity of the financial market. Of course, the prices of the securities may not equal to the internal value of those securities, and such error will lead to generate the bubble of the securities. It is well known that the bubble of security market is the deep root of the financial crisis. And the break of bubble will be the disaster of economy of one country. So if we know how the bubbles generate and how they exist, we will know how to eliminate them and how to beat the excessive speculation. And such behavior will make sure that the securities market will develop well.This paper tends to answer the four questions we will mention below, basing on the consideration of the security of our stock market. And we hope the answers to such four questions will bring the right analysis and the right advises to the stability of our stock market. The four questions are listed below. First of all, in the stock market including lots of noise traders, will the behavior of those noise traders make bubbles? Secondly, what is the relationship between the proportion of noise traders and the quantity of bubbles in the stock market? Thirdly, do lots of noise traders exist in the stock market of China? Finally, do those positive feedback traders who are the classical noise traders use their behavior of positive feedback strategy to impact the stock market, and then make bubbles?In this paper we use the classic model of noise trading (DSSW) and feedback trading model to answer those questions above, and then we make simulation and empirical analysis. We find that the existing of the noise trader will lead to generate the bubbles of securities; And in some certain condition the more the noise traders exist, the more the bubbles of the securities will be. The fluctuation will be more furious, too. Then we find there are noise traders in our stock market. Such people use the feedback strategy especially when the market turns to so-called "a bull market". So in a bull market the stock price of our country will not be equal to the internal value and the bubbles will exist. Finally we use those conclusions to give some advises to our stock market.
Keywords/Search Tags:Bubbles, Noise Trader Model, Feedback Trading Model
PDF Full Text Request
Related items