Stock Price Is Excessive Volatility

Stock price excessive fluctuation is one kind of state that thefluctuation of price deviates the fluctuation orbit of true value, andincludes excessive rising (bubble) and excessive falling. This paper willstudy the excessive rising and falling of stock price in a long time. In Japan, the excessive fluctuation of stock price has inflicted heavyloss to economy, and impacted financial market and financial systemtempestuously. That makes people give a lot of concern and research tothe excessive fluctuation of stock price. On the other hand, the existenceof stock price excessive fluctuation directly signifies that stock market isinefficient, and the normal finance deems that market is always efficient.This conflict also urged people to study excessive fluctuation of stockprice. This paper studies quality, measure and corresponding monetarypolicy of excessive fluctuation of stock price on the foundation of formerresearch. These contents are also the focal point that the academe arestudying and arguing. At the 2nd chapter, quality of excessive fluctuation of stock price issystematically studied, including three aspects: First, the theory foundation of stock price excessive fluctuation.Efficient Market Hypothesis (EMH) contains two efficiencypresuppositions: information efficiency and fund collocation efficiency.We think, Efficient Market Hypothesis as for any hierarchy all must betested at information efficiency and fund collocation efficiency at thesame time. However, the test at fund collocation efficiency must be underthe precondition of that stock true value can be known accurately. It hasto rely on the price models such as CAPM, APT, etc. to estimate the truevalue, and these models are set on the Efficient Market Hypothesis. So allthe methods of test will certainly sink into the difficult position argued ina circle. Therefore, we deem that Efficient Market Hypothesis cannot betested. On the other hand, imperfect information and limited rational facultyof investor is a general condition. Therefore Efficiently MarketHypothesis could not be founded at all. Moreover, Rational BubbleTheory proves that there is still probably price bubble in stock marketeven under the condition of perfect information and rational investor. So,Efficiency Market Hypothesis cannot be tested, limited rational,imperfect information, Rational Bubbles, etc. provides a theoryfoundation of the excessive fluctuation of stock price. We describe amodel of the excessive fluctuation of stock price on this foundation, andbuild an irrational bubble model in this paper. Second, general characteristic and condition of excessive fluctuationof stock price. Generally, there are three characteristics in excessivefluctuation of stock price: Stock price index excessively rises and falls;P/E ratio deviates the history standard far away; Gross value of stockmarket to GDP ratio waves excessively. Generally, there are three outsideconditions in excessive fluctuation of stock price: stablemacroeconomics environment, comparative comfortable monetary policyand fairly free finance system. Third, economic effect of the excessive fluctuation of stock price.There are five negative economic effects from excessive fluctuation ofstock price: Crowding out Effect, Monetary Storage Effect, NegativeWealth Effect, Credit Crisis and Financing Crisis. Among them,Crowding out Effect, Negative Wealth Effect and Financing Crisisdamage real economy seriously; Monetary Storage Effect makes itdifficult to operate the monetary policy of quantity management; CreditCrisis will give acute shock to financial system. At the 3rd chapter, this text discusses the problem of test andmeasure of stock price excessive fluctuation.The major methods to test stock price excessive fluctuation are Shiller'sTest and Efficient Parameter Test. There are several methods to measurestock price excessive fluctuation: P/E ratio, gross stock market value toGDP ratio, stock bubbles expanding ratio and stock bubbles degree.Analyzing and evaluating the methods to test or measure stock priceexcessive...