Based On Behavioral Finance Theory Of Futures Price Volatility Asymmetry

Price volatility is one of the basis characteristics of futures markets. To study price volatility characteristic will do great help us to charge the rules of the futures markets function, and control the risk accident efficiently, promote the sound development of futures market. For this , the paper has done an empirical study on the asymmetric effect (one of price volatility characteristic) in Chinese futures market, and interpret it by behavioral finance.Firstly, the thesis briefly introduces some basic theory and concepts of price volatility, then designs three series future contacts to the three futures contacts' trade data of four years. We investigate the price volatility's asymmetric effect of the three series future contacts by ARCH series models. The results show that "good news" and "bad news" have asymmetry effects on futures markets, the "bad news" has greater impact on markets activities than "good news". For the traditional finance which based on the Rationality person and Efficient market hypothesis can't interpret it rationally, it becomes another "anomaly" of the financial market.Combined with the research fruits of psychology, Behavioral finance stats from investors' real decision making process to study the effect of investor' behavioral biases to the financial market rule. It is the most efficient theory weapon to interpret the market "anomaly".Based on the empirical conclusion, followed by behavioral finance, we collected much material about the investor' psychology and behavior by questionnaire investigation. We found that the individual investors have some psychology and behavioral biases when they are making investment decision. Thinking about these real biases, the paper put forward the behavioral finance explanation to the price volatility's asymmetric effect of futures markets in China. Point out: the individual investor's ability to undergo the risks is too poor, and the investors have "long preference", "over-panic" and "loss aversion" psychology which lead to the under-reaction to good news, but over-reaction to bad news. It means that the investors is conservation to good news, and over-confidence to bad news, it is called "confidence revulsion" in this paper, which is the based reason that cause the price volatility's asymmetric effect of futures markets.At last, the paper's conclusion show that changing the characteristic of price volatility' asymmetric is one of efficient ways to control the risk accidents, in short, the most important thing is to strengthen education to investors, to nurture rational investors.