Asset Price Bubbles, And Based On China's Stock Market, The Empirical Analysis

After the Shareholder Structure Reform was successfully launched, China share market has witnessed a big rise in all indexes. While the index approached a new peak in history, the debates on stock market bubbles has prevailed in the press. But in talking about the bubbles, there still has no widely accepted definition on it, as well as how to identify a bubble from the price of an asset.Papers on assets bubbles mainly broke into two lines; one is based on rational expectation and named rational bubbles; the other is based on behavioral finance. Rational speculative bubbles theory has played the main role before 1980s. A lot of researchers wrote papers on the characteristic of rational speculative bubbles while the others put their feet in revealing the developing process of rational bubbles. Attributed to their endeavor, the framework of rational speculative bubbles model had been well formed. The behavioral finance made its biggest progress in 1980s. It denied the rational hypothesis of the investors and regarded fan as an important factor in affecting the investors' trading. In such a way, behavioral finance researchers provided another explanation of assets bubbles.This paper adopted the rational speculative bubbles model. Chapter 3 educed the solution of rational bubble from an Euler equation and provided three kinds of the Markovian Bubbles. This paper mainly focused on one kind of these bubbles, the Bursting Bubbles.This paper used the run duration dependence method in testing the bubbles of China stock market. The results of the nominal returns are testified of contain bubbles in all the seven indexes. After remove the data pre-1996, the notability of bubbles has been reduced. There are no robust results in the test of excess returns. This paper also used autocorrelation test and statistic test in checking bubbles in Shanghai and Shenzhen market. All the results are appeal to reject the no bubble hypothesis.In Chapter 5, the paper has provided some advice on how to supervise the bubbles.