The Institutional And Policy Reason To The High Volatility In China A-share Market

Since established, our stock market has existed excessive volatility. According to historical data, many abnormal fluctuations are caused by the control policy of the regulatory authorities in China, some of which influence stock market for long time. In addition, the gross of shares is confined in our stock issuing system, the inadequate regulation also bring on the diversity of investors, these defects maybe amplify the volatility of stock market. So, if we find the transmission mechanism between the policy and volatility, we can improve the fundamental system of stock market.In this paper, we explain the transmission mechanism between the policy and volatility by the means of mental account and DSSW model in behavior finance theory, and test it by statistical analysis according to our stock market data. Firstly, from a macro point of view, we discuss the stock demand curve using mental account under the control of shares issued, and find the stock supply curve cross the demand curve in the steep area, so, the impulse of stock demand and supply of shares will enlarge the impact of price fluctuations in the stock market corresponding to the absence of the overall control system, then we educe the pricing decision mechanism. Secondly, from the micro perspective, we find there exist remarkable noise trade under the influence of the special issuing system in China, and use DSSW model to describe how the noise traders amplify the volatility in stock market. Furthermore, we employ DSSW model to reveal the influence caused by policy. Finally, according to the analysis above, we present conclusions and policy recommendations...