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Investment Strategy Of Our Warrants Market Based On Behavioral Finance

Posted on:2011-04-27Degree:MasterType:Thesis
Country:ChinaCandidate:M ZhangFull Text:PDF
GTID:2189360305968946Subject:Quantitative Economics
Abstract/Summary:PDF Full Text Request
In 1990, Shenzheng Stock Exchange and Shanghai Stock Exchange have established, after a decade of development, China's stock market is in its infancy, and the derivatives market also started to explore its prelude.Although the Warrants market in our country in these years has made the development process as well as the gradual improvement of such a huge success. However, there is great difference between West markets and our markets because of the time factor and system factor, the market did not go far enough with excessive government intervention," policy market" is still serious. The Warrants Market is a new thing for the majority of people in our country, many investors did not have the required expertise and ability to judge, but to find insider information and chase market as the basis for investment decision, so there are a lot of noise traders in the warrants market. Investors have to bear the noise trading risk because of the role of noise traders, so the warrants prices have a major departure from its theoretical value, investors are in fact very dangerous. After using the investment of the modern portfolio theory with the main features of diversify investment for many years. The investment community found it can not explain the reality of the various "abnormal phenomena". In this case, the concept of behavioral finance has been put forward, it is on the basis of standard finance with development as a powerful complement to the standard finance. It became a hot issue to research the act of investors in the securities market on the use of behavioral finance at home and abroad in recent years. In the behavioral finance, it added the sentiment of investor as a variable affected the price to the model so that the prices of securities are more fitable with the actual situation.Behavioral finance theory has a more broad application prospects for our warrants markets filled with the noise transaction. Our Warrants market is full of irrational retail investors. In addition, many professional investors were driven by speculation, had joined the ranks of speculative. The whole Chinese Warrants market is full of a strong element of speculation with great degree of noise trading. Therefore, investment based on behavioral finance will help investors achieve better investment performance.First, this article introduced the development of behavioral finance, and compared it with standard finance theory to explain the reality of his nature of the market. Then this article described the current situation of China's Warrants market, analysed the abnormal phenomena of Warrants market, serve R2 as a measure of private information arbitrage index and introduced the level of noise trading to empirical analysis, studying the characteristics of the noise trading of Chinese warrant market from the macro-level. According to the China's Warrants market, then we measured the extent of noise trading of various warrants from the micro-level. Finally, this article tried to give a suitable investment to investor. From above analysis, we can draw a conclusion:On a weak efficient market such as China's Warrants market, behavioral finance theory has an extensive suitable prospect. What we should say the innovation lying is:We proposed a reasonable proxy of noise trading variables and constructed the noise trading sequence to test the degree of overreaction and inadequate response of various warrants, put degree of noise trading as an effective factor in a decision of investment, and compared it with other traditional comparison of financial investment strategies. Finally, combined with China's actual characteristics of the market warrants, we try to give an advice to investors to establish an investment system including noise trading model, momentum strategy and contrarian strategy.
Keywords/Search Tags:Warrants market, Noise trading, Capital Asset Pricing Model, Behavioral finance
PDF Full Text Request
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