The Empirical Study On Asymmetric Volatility In Stock Exchange Based On Behavioral Finance

Since it is established, the stock exchange has been the barometer for performance of economic. The stock market has the function of resource allocation and risk pricing. The volatility of stock exchange is one of the most important financial study in empirical study, and it is also a important question for discussion problem in financial research. Volatility of stock exchange, which is a core content in financial research, is widely used for measuring the degree of risk, calculating asset pricing, testing the efficiency of stock exchange and managing risk in investing financial derivatives. Therefore, the study of volatility of stock exchange has practical significance.Recently the development of behavioral finance has provided a new angle of view and method for the study of volatility of stock exchange. The most important difference between traditional finance and behavioral finance is that whether the investors are rational. This paper analyses main reason of asymmetric volatility in Chinese stock exchange from the aspect of investors' non-rational act, and focuses on the analysis of investors' over confidence, herd effect and disposition effect. The paper modifies EGARCH model of asymmetrical study in stock exchange with introducing core financial theory—value function, and also make a empirical study. The empirical result show that the asymmetric volatility of Chinese stock exchange significantly exists, and the same level of good news has greater than bad news, then explain this phenomenon from investors' behavior of behavioral finance.Firstly, the paper reviews theory of financial market about research of asymmetric volatility and behavioral finance on investors' psychological behavior. Then it analyses formation mechanism of asymmetric volatility in Chinese stock exchange, and also analyses investors' over confidence, herd effect and disposition effect, and its actual impact on Chinese stock exchange.Secondly, on the basis of EGARCH model, the paper introduces value function in behavioral finance, and establishes a model based on investors' psychological factors, also it gives the methods of parameter estimation.Finally, the thesis analyses the empirical result, and gives advice to the construction of Chinese stock market and investors.