Behavioral Finance And Investor Confidence

In recent years, the stock market in our country has been continuously running down, half past of the value of stock market has been lost. All of the above don't match the tendency of macro economy. The reason is complex, but the deeply destroyed confidence of investor is the key. Domestic scholars have present many tactics from the different sides of current problems such as the division of stock rights, the less channels of capital, the lower level of the security market opening. Those tactics are addressed by the standpoint of standard finance. But it is a matter of common observation that our security market deviates the basic hypothesis of standard finance so far , on the contrary, agrees with the basic hypothesis of behavioral finance. My article will try to give proposals from the view of behavioral finance.First, in the preface, I shall introduce the naissance of the contemporary finance theory and the questions which the contemporary finance theory must work out. moreover, point out that the different answer to the question "who dominate value of finance assets and what are the theory hypothesis of their decision behavior manner" lead to two theory : standard finance and behavioral finance.What to follow is the comparisons between standard finance and behavioral finance in the second chapter, moreover, the theory frame of behavioral finance, the cross swords between the two theory and the behavioral finance theory's innovation in model, theory and method with regard to standard finance theory arc also offered.In the third part, I shall introduce the problems occurring in current security market such as division of stock rights and dissymmetry of information, then lay out the policy proposal of domestic scholar, complete negotiation for example. Hereafter, I shall point out that those questions above result in serious shortage of confidence of investors, an extremely urgency is how to stimulate the confidence of investors. Eventually, I set up a model and certify the relation between the confidence of investors and the rising and declining of stock market by method of testament.In the forth part, I shall introduce basic conditions and investment behaviors of investors in security market of our country, point out that their behaviors take on a look of behavioral investors in place of rational investors. The next is the introductions to theories as to confidence of investors in behavioral finance theory: prospect theory, anchoring effect, herd effect, representative deviation, regret avoiding, etc.In the fifth part, I shall evaluate the current policy proposals briefly and giveadvices about how to protect confidence of investors including representative building-up, anticipation stabilizing, consensus reorganizing, investor's education enhancing, etc.At the last part, I shall point out the crucial strategy to solve the current predicament is to lay down correct policy path, stimulate confidence of investors and try our best to diminish the impact towards economy of policy variables. Those problems that can be solved with the development of economy shouldn't be carried too far.