On The Chinese Stock Market, Abnormal Fluctuations

Chinese stock market has fluctuated frequently and violently for a long time. It has more abnormal volatilities than other developed markets, though price volatility is a necessary phenomenon in stock markets. Dramatic fluctuations will cause investors hardly make right decisions, will undermine the market efficiency, will wreck national economy's healthy development, till induce economic crisis. Therefore it is important to research the abnormal volatilities and their causes.Volatilities are the outcomes of the market investors'transactions. The market players'transactions affect market performance. This paper studies abnormal volatilities in the perspective of market players, and divides them into four parts:the authority, institutional investors, major shareholders of the listed companies, small and medium-sized investors. In this paper, we firstly analyze the impacts of the authority on the stock index, which belong to the macro-level. Besides this, we analyze the impacts of institutional investors, major shareholders of the listed companies, small and medium-sized investors to individual stock, which belong to the micro-level.At the macro-level, there is a strong policy effect in the Chinese stock market. The authority intervenes in the stock market deeply, and the stock market performance according to a "Policy Market" characteristic. Specifically, the paper will study how required reserve rates of the commercial bank, deposit and loan interest rates, stamp duty rate and other public policies from the authority actions cause abnormal volatilities on the overall stock market (especially index).At the micro-level, this paper bases on the historical data of listed companies in China in 2007 that is provided by the Chinese famous financial database-Wind Info, and carries out a descriptive analysis, attempting to draw conclusions about abnormal volatilities caused by investors, who include institutional investors, major shareholders of listed companies as well as small and medium-sized investors.Finally, this paper intends to provide valuable suggestions and recommends in order to increase the efficiency of supervisory and to prompt the healthy and steady development. As the supervisor and the manager, the authority should intervene the market moderately, follows the prudent principle, keep the relative stability of policies, supervises the market according to relevant laws, avoids administrative intervening, sets up dynamic supervising mechanism. Meanwhile the stock market should be located accurately, industry self-discipline and information disclosure mechanism should be strengthened, and derivative financial instruments should be introduced into the market in a appropriate time.