Investors On The Chinese Market, The Disposition Effect Study

With the standardization of China financial market, there are more and more researchers applying modern financial theory into China financial marketThe conventional financial theory is based on the assumption that investors are absolutely rational, which is challenged in the current ever-changing market situation. In 1960s, the Behavioral Finance rose up to cope with the new challenges. The Behavioral Finance assumes that investors are partly rational, not absolutely rational. It combines human psychology and behavior into the framework of financial theory, which make it possible to eliminate the gap between financial theory and reality. The Behavioral Finance involves human psychology and behavior, which is somehow a field with much uncertainty. But with the development of Expectation Theory and Behavioral Portfolio Theory, the Behavioral Finance has made great progress despite those difficulties.Disposition reaction is an important element of the Behavioral Finance. It refers to a typical recognition errancy, the "assurance attitude" to invest benefit and "dislike attitude" to invest loss. In the invest behavior, it is embodied as the willingness to sell out stocks with profit and unwillingness to sell out stocks with loss, etc. The reason for the irrational behavior of investor is the impact of psychological factors, which is difficult to explain in conventional financial theory.In this paper, we investigate the disposition reaction of China financial market based on real-world investor behavior case study. Certain investors' invest behavior during a time period is analyzed to verify whether there are this kind of " sell benefit and hold loss" psychological tendency and disposition reaction. We give out the theory explanation based on data statistics. The direction for further study in the future is also provided.