Stock Price Volatility Mechanism Analysis And Empirical Research

In China securities exchange market, stocks price frequently and violently fluctuate without any fundamental causes, which brings harmful influences on investors and security market. Therefore, it is essential to reveal the status, character, return and risk involved in this kind of stock volatility for investors, superiors and sound operation of security market.Starting with relevant contents of Noise Theory, according to the specific reality of information asymmetry, the -thesis present a model of tremendous volatility with market manipulation, basing on the analysis of stock's volatility theories, abnormal behavior and the properties of China stock market. Can the model really work in China securities market and explain the kind of abnormal phenomenon? To test the validity of it, the thesis programs the empirical research which is conducted with the method of event study. The sample collection is all of those stocks which security code arranges after 600600, and cumulated abnormal return basing on Single-index Model is taken as scale standard. It is conducted towards six kinds of portfolios constructed by cumulated abnormal return.The empirical results indicates: 1) During the term of event forming, six kinds of portfolio have such behavioral traits as non-raadomicity, violent jumping, et al. which can not be explained without market manipulation. 2) During the term of test, the trend of six portfolios reverse, most of daily return being negative, and cumulate abnormal return being prominently negative, which is suited with our noise trading model. 3) The dynamic traits of six portfolios are very concurrent. After a further analysis towards the performance of forming and testing , it is proved that the noise trading model is suit to explain the violent volatility in China stock market. 4) Short-term momentum strategy has tremendous risk, and is unable to gain return. Risk and return are not positively correlative. The above results show that our noise trading model has grave practical meaning to uncover the theory of stock violent volatility, guide the investment of investors, and protect the interest of investors in China stock market.Finally, after a simple analysis and discussion about causes of the problem, It ispointed out that excessive noise trading is inevitable if given unsymmetrical information, and the issues of information release from listed companies should be emphasizly supervised and inspected at present, and reform towards the system of state-owned equity should be processed in pursuit for an ultimate settlement of the problem in a reasonable manner from the long-run term.