Study On The Speculative Behavior In The Stock Market Of China

China's stock market has made great progress since its founding in 1990s.From the originally first eight listed company to the 1625 listed company in the end of 2008(including Shanghai and Shenzhen Stock Exchange), China's stock market has been developing rapidly all the time. As an important investing and financing channel, China stock market will produce wider and far-reaching influence in the fast economic development of China. It is undeniable that the development of China's stock market hasn't accomplished overnight, during which has seen many twists and turns. There are a series of problems such as the low market-oriented level in the rapid-growing market and it is far from mature compared with developed markets. Some problems even blocked the development of stock market at one time, for example, the unclear property rights of enterprises, non-tradable shares and so on.The high level speculation grade has been the focus of academia. Speculation is the internal characteristic of stock market, therefore, it's inevitable and it cannot be avoided in market economy. Moderate speculation plays an important role in increasing the liquidity of stock market and enhancing price discovery. However, excessive speculation is the stumbling block of stock market. It will not only cause bubbles of stock market, but also can bring about economic dislocation, but also threat the social stability and sound development of the whole economy. In recent years, the Subprime Mortgage Crisis affected the whole world, soaring and nose-diving turned up in Chinese stock market in the mean time. Against this major background, it will be of much reference for the restrain of excessive speculation and promotion of security market and even for the sustainable and sound development of the whole economy through measuring the level of speculation in China's stock market at present stage and analyzing its reason. This paper is divided into five chapters. The first chapter states the significance of topic selection and the paper's framework then outlines the development of domestic and foreign speculative theory and related research results.The second chapter firstly defines the meaning of speculation and analyzes the reason and necessity of speculation's existence, which lays theoretical foundation for the analysis of the whole text. Secondly, this paper exposits the three stages during the development of China's stock market as a function of time. From the statistical analysis we can see that Chinese stock market has high volatility and deviates from economic cycles which imply that the stock market doesn't bring into full play the role of barometer of the economy. Subsequently, this paper briefly analyzes the reason for speculation preference and its effect to stock market. It is concluded that China stock market exists severe excessive speculative behavior through historical data analysis and comparison with foreign developed countries from three indicators—turnover ratio, price/earnings ratio and volatility.The third chapter is the cause detection of excessive speculation in the Chinese stock market. This part analyzes reasons that lead to excessive speculation from the following aspects—economic system, investor structure and investor psychology, listed companies, international hot money affluence and so on. Among these causes, the institutional elements include strong administrative control of the stock market, the unbalanced capital market structure and supply-demand relationship, lacking market maker system which will help stabilize the stock market, the market mechanism that restrict speculation's at its elementary stage, incomplete market withdrawal mechanism and so on. Moreover, individual investors still take up a large proportion in all investors. Commonly existing violation of regulations of institutional investors and intermediary's general loss of credit are also factors that give rise to serious excessive speculation behavior in stock market of China.From the perspective of behavioral finance, factors which lead up to excessive speculation over China's stock market also include investors'cognition bias, herd mentality and subsequent herding behavior. In addition, the listed companies which play basic role in stock market are of low-quality and give little dividends to shareholders. Besides, listed companies lack effective incentive and restraining mechanism in corporate governance, driving the stock market in the direction of speculation. With the increasing momentum reform and opening up, international hot money inflows have also become one of the elements that lead to stock market instability. A large amount of international hot money enters China stock market through underground illegal money exchange, or in the name of foreign investment or other various forms. It has become an important force to be reckoned with in Chinese stock market development under open economy conditionOn the basis of thorough analysis of the causes of excessive speculation in China's stock market, the fourth chapter elaborates the harm of excessive speculation from aspects of economic stability and development, listed company, the maintenance of investors'interest, national economic security and other aspects. This chapter also illuminates the economic damage that international hot money might do, illustrating Japanese"the Lost Decade".Through expatiating the manifestation, reasons and harm of excessive speculation in Chinese stock market, the fifth chapter put forward relevant policy recommendations from perspectives of promoting capital market development, regulating institutional investors'behavior, educating individual investors, strengthening the governance of listed companies, improving the quality of listed companies and preventing the risk of international hot money, so that we can restrain excessive speculation and safeguard the sound development of Chinese stock market.Speculation goes together with stock market and it's a double-edged sward, worthy of the name. In the development f stock market, we should persist into the market oriented direction, centering on the regulation of market participants'behavior and improvement of the market mechanism. It should be emphasized that we must promote the development of stock market through modest speculation, crack down on all illegal economic activities and create a fair, transparent and normative place for market participants to invest and finance. Therefore, we can inhibit excessive speculation in stock market and safeguard the legitimate rights and interests of investors for good.