Influence Of Investor Involvement On Stock Index Price In China

The most important indicator of stock market is price index, because it is an essential date to measure the overall level and the fluctuation trend of the whole stock market. For a long time, there are many scholars having devoted their effort to study the fluctuation law of stock market index, and there are also continuous researches on its influence factors. After summarizing and studying the related researches of foreign and Chinese scholars, this paper made an empirical analysis about how the Investor participation influence the stock price index on the theoretical basis of financial market supply and demand theory and behavioral finance. Investor participation refers to the condition of investor participating in stock market trading. In this paper, the investor participation is reflected by the number of investor accounts in China, including two major categories:the number of new accounts and final account, containing a total of twelve variables.The contingent of stock investors grows lager continuously, which continues to inject new energy to China’s stock market and promote its continuous development. The investor participation in stock market reflects investors’ demand for benefit from stock investment. Either the number of new accounts or the number of transaction account can show the condition of investor participation. However, the only purpose of investors is gaining benefit. According to the theory that price is determined by supply and demand, we can believe that there is a certain relationship between investor participation and stock price. Correlation analysis shows that the relationship between new accounts and stock index up to80%. From the perspective of behavioral finance, China’s stock market is not mature with many problems, so there is a long way to reach a ideal "efficient markets". Chinese investors are also far from the "reasonable person" in traditional finance.This paper chooses Shanghai Composite Index, Shenzhen Composite Index and Juchao1000Index as the date to study the stock price index. Shanghai index and Shenzhen index are the most commonly used reference to study the price fluctuation of Shanghai and Shenzhen stock market. Juchao1000Index collects the cross-market index of1000most representative listed companies in Shanghai and Shenzhen stock market.It shows the trend of China’s whole securities market. This paper study the degree to which the investors participate influence the above three indices and establish the prediction model respectively. Because the selected data are of characteristics of time series, they are processed and inspected with time serial method. Through the ADF test, the cointegration test and the Granger causality test, it is concluded that there is a very close long-term stable relationship and causality between some variables of investor participation and stock price index. Finally, the linear regression model which is established by least squares estimate fitted the trend of stock index. so, this prediction model is proved to be valid.