Research On The Measurement Of Speculative Bubble Realized In Stock Market

Since the startup of China's stock market in the second half of 2006, Shanghai Stock Index has rose from 2000 points to historical 6000 points, and foreign investors called it a "dragon market". But the situation changed a lot in 2008. The stock index dropped from 6000 points to 2000 points. Such a change which looks like an inverse "V" shows that the capital market is immature. Under such a background, it is important to study the mechanism of speculative bubble and establish scientific index system to estimate stock market, so as to help investors to make decisions and government to choose the suitable policies.In this paper, various methods including the combination of theoretical and empirical, positive and normative analysis etc. are employed. And also some tables and graphs and mathematical models are used. With the data of banking, real estate, coal and oil, iron and steel companies in the Chinese Stock Market from the third quarter in 2006 to the fourth quarter in 2007, all of which contribute to measure Speculative Bubble of Stock Market.This thesis distinguishes the concepts of rational and irrational bubble in terms of their essential character, and explains systematically the generative mechanism of the two kinds of bubbles by using rational expectation theory and financial noise theory. Then, based on the previous researches related to estimating the bubbles, this article chooses DEA to measure it, especially in the speculative bubbles. At last, using the samples of key financial indexes in 6 quarters from 2006 to 2007 of stock market in China, this article measures the level of speculative stock bubbles of the important sectors in stock market with DEA, which aiming at find out evidence in measuring the integrated speculative bubbles' level. It finds that the bad performance companies with higher stock prices always have speculative actions, which are named as speculative bubbles. Therefore, the speculative bubbles' level can be measured by calculating the ratio of the number of these companies to the total number of samples.The result shows that the speculative bubbles' level in China is increasing with the index of stock market. At the end of 2006, when the index of stock market just starts to rise, the level keeps going up too. While after the adjustment and regulation after the Spring Festival of 2007, the level decreases. However, with the high stock market index, the speculative bubbles' level gets higher and higher, showing higher market risks.