Study On Cognitive Bias And Risk Preferences Of Chinese Individual Stock Investors

At present, many of the problems in the field of behavioral finance were still only just starting to be discovered. The most important part is the research about the behavior of stock market investors. Up to now, this aspect of the research in China has just begun. Most of the research is the literature review, and there are a few empirical studies referred to apply foreign research methods in some anomalies of China's stock market. Currently, the domestic research about the application of behavioral finance foreign research results will not be applicable because of the Cultural differences between eastern and western investors. Limitations of the theory itself will reduce the effectiveness of the China's stock market research. This thesis is based on the above issues and tries to make a study on cognitive bias and risk preference of the Chinese individual investors, and the result is applied on the decision-making.First, the paper has summarized the status of domestic and foreign behavioral finance research. The foundation of economic psychology, the theory of cognitive bias and risk preference and the theory of expected utility function are also introduced and an important part of the introduction is the basic theory of behavioral finance before and after the formation of the prospect theory.Then, Questionnaire survey methodology is used to analyze the cognitive bias, risk preferences and other psychological bias factors of Chinese individual investors. Based on experimental economics study abroad and cultural differences at home and abroad, the questionnaires were designed in the light of the psychology of Chinese people. Survey analysis found that individual investors on China's stock market were at a relatively high degree of Cognitive bias. There are anchoring, overconfidence, representativeness bias, conservative bias, disposition effect, mental accounting, reference point dependence of bias, while there are some attribution bias. There are uncertainty aversion effect, loss aversion, risk preferences money effect and other residential characteristics. China's policy is a factor unique to China's stock market.At the same time the linear regression method is used to make an empirical study on cognitive bias of Chinese individual investors. The empirical analysis focused on the over-confidence based on trading volume. The results showed that during the actual investment process individual investors indeed have cognitive biases. Finally, the conclusions of the third chapter and fourth chapter are applied on the decision-making and a decision-making model was established. It has played a significant role in promoting China's individual investors to make more rational and objective decision-making. Meanwhile, the Chinese government and market regulators can take more effective measures to promote market development.