Research On Bounded Rationality Behavior Of Securities Market Individual Investors In China

The traditional financial economy supposes that the investor is ration and makes decision due to the maximum avail. However, unusual phenomenons of security market tell us: decision of investor is bounded rationality, not rational. Since speedily development and incomplete of legal system in our market, bounded rationality behavior appears to be active in our market. So it's necessary to carry on further research of investor bounded rationality, to find out the reasons of cognition biases, and law of investor decision based on bounded rationality, which can promote the sound development of the security market.Firstly, this article made a review in the behavioral research of investors in security market, and on the bases of psychology introduced the cognition biases investor has. Secondly according to set of bounded rationality behaviors caused by investor cognition biases, the article analyzed unusual phenomenon namely deposition effect, herding behavior, over-reaction and over-confidence in Chinese security market. The paper supposed that the reasons caused investor cognition biases are the factors of investor attitude, capacity and limited information and so on. And due to existing of investor bounded rationality, influenced efficiency of market resources allocation, listed company management and security market instability. Thirdly, to explore decision-making process under bounded rationality, the article analyzed individual investor psychology on decision-making process by the field research, and summarized changing process of investor bounded rationality. Then we researched factors effected on decision process by integrated cognition construction of human beings and emotion theories, built a generally investor decision-making process model. Finally, the paper gives some detail suggestion for the promoting our market construction and behavioral investment strategies to investor based on behavioral finance theory.