| Behavioral finance is a rapidly developing and very important branch of Finance. The study on application of behavioral finance in stock market system has been newly focused in the theoretical research on Economics. Stock market systems have operated and evolved out-of-date, due to their complexity. Traditional theory and methodologies in the study of stock market are difficult to tackle the complexity, which chaos theory, an important instrument in study of system's complexity, has been used to tackle.Although some progresses are achieved, mathematical and physical chaos theory can not give a logical explanation about what lead to stock market chaos(SMC) and what the function mechanism is. This paper focuses on the study of application of behavioral finance in SMC theory. Firstly, based on the system characteristics of stock market, the paper describes the scientificity and feasibility of applying chaos theory to the study in stock markets. In terms of the study method of SMC, the necessity and essentiality of combining behavioral finance and the study in SMC are discussed. Secondly, a system dynamic model based on behavioral finance for stock market systems is constructed, which evolvement behavior is simulated by computer. The simulation results show the chaotic characteristics of the model. Finally, the relation between the fractal of stock market system and behavioral finance is analyzed. The main conclusions of the paper are as follows:The analysis of chaotic behavior of stock market system's dynamic model shows that the states of Stock market systems (e.g. stock price index) can transit firstly from equilibrium states to periodic states then to chaos while some parameters of the model (e.g. investment priority) change. Further, the chaotic behaviors vary for different period and different nations in which the stock market lies.In the conclusion, the deficiency of the paper is summarized, and the future research topics are prospected. |
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