Behavioral Finance Analysis Based On The Chinese A-share Market

Behavioral finance is an emerging science, a perfect combination of psychology and finance. Also it is a revolution in the field of finance theory. This revolution has evoked strong response in the academic community over the past ten years, challenges the traditional dominance of the financial study, and builds its own theoretical system. It focuses on people's psychological and emotional impact of their investment decision-making, the pricing of financial products, and financial market trends for future development.With the continuous development of financial markets, the conflict between traditional financial theory and the reality of financial markets continues to happen. Investors based on a rational and efficient market hypothesis of the traditional financial theory has suffered an unprecedented challenge. Many empirical studies also show that subjective factors, such as Human behavior, psychological feel, impact financial investment. So investors are always making bounded rationality-decision. The market exist the situation of biases cognitive and bounded rationality. Because of China's securities market's being an emerging market on a period of economic restructuring, it has a clear specificity. Traditional finance theory is difficult to explain the various special phenomenons in Chinese securities markets. The introduction of the Weston behavioral finance theory provides a more convincing explanation on the special phenomenon of China's securities market.Since October 2007, the rapid turn of bullish to bear goes beyond the expectations of most investors. Over-confidence of investors and the expected future performance on listed companies have been major changed. The characteristics of Policy Market are obvious. The aspirations to rescue the market are growing louder, but the market to introduction of the rescue package is not sensitive. The investors start panic selling after a short-term stimulative rise. Because of institutional investors' expect to decline in the economy; the institutional investors generally agreed that A-share market into the bear market. A lot of money into commodities trading caused Herding Effect. Because of China's listed companies' preference on equity financing, they hastily issuing the financing plan in extremely bad market environment led to market's doubts on listed companies sustained profitability and financing motives. A new round of panic selling further enlarges the Herding Effect. In 2008, Chinese stock market being filled with all kinds of message, some individual investors listens to various messages to do irrational transactions, causing them to be noise traders. Sometimes, that part of noise traders' yields are much higher than the rational arbitragers made part of rational arbitrager driven by short-term benefits be noise traders. These people have had a negative impact on the stock prices.This article focuses on that the investment behavior of the investors impact stock market under Chinese A-share market environment at a substantial adjustment. From the perspective of behavioral finance, this paper analyzes the investors' and listed companies' performance in China's stock market reveals the various special phenomenon of China's securities market. Based on the market behavior of the main, it explains the causes of a substantial adjustment of A-share market.The body of this article is divided into four chapters:The first chapter introduces the significance of this article, as well as the literature reviews related to this article at home and abroad and innovative point of this article in a brief introduction. In this paper, the significance of topics , from the perspective of behavioral finance, analyzes stock market behavior of the main to influence the A-share market, and reveals various special phenomenon. In the chapter, we searched the literature reviews at home and abroad and current study.The second chapter of this article can be used as the bedding of the last two chapters. This chapter includes the origin of behavioral finance and development, the core of behavioral finance theory - Prospect theory, behavioral portfolio theory, behavioral capital asset pricing theory, the main theoretical models, the efficient market hypothesis facing challenges, and behavioral finance to explain.The third chapter of this article, the core section, is divided into three parts: from the perspective of irrational investment behavior, such as individual investors' over-confidence, over-reaction, Herding Effect and noise trading, and so on, the first part analyzes the characteristics of China's securities market, a substantial adjustment of A-share market. The second part analyzes various special phenomenons. of China's stock markets and institutions effect on the behavior of the stock market through the limited rationality of institutional investors, herd behavior and market manipulation behavior and so on. Part III briefly analyzes the equity financing preference of listed companies on the stock market's negative effects.Chapter IV, the final chapter of this paper, sets forth behavioral Finance in China's vast development and the recommendations to construct China's stock market. Proposal has two major points: recommendations to Supervision department of the government, recommendations to Securities intermediary. Finally, I briefly describe the interaction between the market system and financial culture formed by the historical culture, and the interaction will have an immeasurable impact on the behavior of the main market players.