Again On Short Research With China Warrants Market Bubble

Many economists have been plagued by the formation and development of Bubbles. Many people researched the problem of bubbles, from tulip mania, to Japanese real estate bubble, to the first Internet bust to the recent housing bubble.Although economists have advanced many bubble theories to explain these phenomena such as the theory of rational bubbles, Greater Fool Theory and Gaming behavior theory. However, the bubbles which have emerged in recent decades show that people don’t understand the whole "bubbles" thing.As Baosteel warrants listed on August22,2005, the Chinese warrants market boarded the stage of history again after an absence of nine years.What is noteworthy is that the recent controversy related to warrant bubble, lingering, such as the want of sense. The paper takes China’s warrants market as research subject. and finds that there are a lot of bubble phenonomena in China’s warrants market. By comparison, we find that the base level of bubble frequency in Shanghai warrant market where there is short mechanism is significantly lower than Shenzhen warrant market where there isn’t short mechanism. The study has provided the most compelling evidence which supports the laboratory study found that the short can eliminate the bubble.At last,the paper explains these conclusions and provides some suggestions.