China's Stock Market Bubble Causes Analysis

The stock market in China has developed for more than 20 years. It plays an increasingly important economic development role in our country. In resent two decades of the ups and downs, we frequently observed the phenomenon that the stock index waved again and again. It is of high theoretical and practical signification to point out that price fluctuation may cause the stock market disorder, and even lead to financial crisis. However, the current study of stock market bubble can not provide theoretical and practical support for the solution of the problem. Therefore, how to define and measure the presence of bubbles, how to determine the various causes of the bubble, and how to prevent and even control the stock market bubble, etc., many of these issues on the stock market, need us to give clear answers as soon as possible. This paper studies these issues and puts forward policy recommendations on base of national conditions of China.This paper is divided into five chapters, in which the measures and causes of China's stock market bubble are the focus of analysis.The first chapter is the introduction, which is divided into four parts. The first part presents the background and significance of this study. After reviewing lessons of the stock market bubble of developed countries, this paper points out that current research of the problem in China has its positive significance. For the second part of this chapter, stock market bubble conceptual definition and theoretical analysis are indicated, and some of the concepts associated with the stock bubble are discussed. The third part is the literature review at home and abroad and the fourth section describes the structure and main contents of the paper.In the second chapter, we study the existence of the stock market bubble in China and this chapter is also divided into four parts. The first part describes the theory of speculative markets. The second part reviews the history of some of the bubbles and their speculative nature. In the third part, we study the existence of China's stock market bubble from the perspective of price-earnings ratio. In the fourth part, we introduce the application of Residual income model for the measure of China stock market bubble.The third chapter analyzes various effects of stock market bubble, including wealth effect, credit and debt structure effect, capital cost effect and its social effects. We expect to have a better understanding of the stock market bubble through the analysis of its effects.In the fourth chapter, we analyze various causes of the bubble based on the different stakeholders. This chapter is divided into six parts. The first part analyzes the formation mechanism of the stock market bubble based on asymmetric information theory. The second part describes the entire life cycle of the stock market bubble. In the third part, we study general investors and institutional investors whose non-rational behaviors may cause stock market bubble. In the fourth part, we study the causes of the stock market bubble mainly from the perspective of listed companies. This section focuses on insider trading which plays an important role on the bubble. In the fifth part, the role of the news media in the production of stock market bubble is analyzed. The last part of this chapter reviews China's stock market "Policy Market "features, which means policy plays an important role on China's stock market bubble.In the last chapter, we have some conclusions and recommendations for the paper. After summing up the main conclusions, this article mainly introduces various proposals to prevent and control China's stock market bubble which includes the ordinary investor education, institutional investor regulation, governance structure of listed companies, and the transformation of government functions and so on.