Research On Chaos In China’s Stock Market On The Condition Of Bounded Rationality

China’s financial markets have enjoyed a period of strong growth after its integration into the global financial markets since the1990s and have formed a relatively reasonable financial market system. Shanghai and Shenzhen stock market have complementary advantages and become more and more worldwide. But none of these theories like the value theory, the behavioral theory or the chaos theory could interpret the behavior of the stock market. They separately formed their own theoretical system. The market is still so unpredictable, so we should make a further research on how to interpret the uncertainty.Many theories and researches were used to predict the future market, but none of them is absolutely perfect. Hence a new idea comes to me that the uncertain market volatility does not form itself spontaneously. The past researches on the market attached much importance to the external factors, whose influence on the market volatility could not be ignored. This paper will make an analysis on the uncertainty from a point of view in a broad sense, which include the extension theory of the system integration.The former studies include the capital asset pricing theoretical paradigm based on the price, the Chaos behavior paradigm based on the physics and the behavioral finance paradigm based on the psychology. The domestic researches take the empirical research and the theoretical overview as its two main focuses, and every paradigm has its limitations in that they all interpret the market volatility from one angle.This paper tries to clarify a more integrated view which will integrate the latest behavior finance and the chaos and fractals and will also analyze the relationship between them. Because they approach the issue of market from an incomplete point of view in terms of the humanity or the market itself. Consequently it is required to combine the two theories to get a initial understanding on the market behavior. This paper falls into six parts, which are as following: The first part is the introduction of this paper, which tells the background, the contents and the significance of this research. Some breakthroughs and inadequacies will also be described in this part. The logical framework and the research methods of this paper described here will pave the way for the subsequent ideas.The second part falls into two parts, the theoretical overview and its assessments, which mainly analyze and make an assessment on the current situation of the related national and international researches. Three parts are included here, the application of chaos behavior in the financial field, the theoretical exploration of the bounded rationality hypothesis in the behavioral finance, and the development process of the Grey Neural Network Model(GNNM). This part provides the theoretical basis for the theory integration and the proposed paradigm.The third part, the central part of this paper, provides the theory integration and the new paradigm which mainly clarify the process of interaction between the rational behavior and the spontaneously formed market behavior, through which the theoretical basis of this paper can be formed that is to unify the internal and the external mechanism.The fourth part aims at classifying China’s stock market behavior and making an empirical test on it by using the GNNM. Make a classification of China’s stock market and imitate the market behavior by establishing the GNNM. This part falls into two aspects, which serves as a supplementation for the front theories.The fifth part makes the conclusion of this paper, the theory extension and the future prospect. Several conclusions could be drawn in this paper:the spontaneously formed market behavior can cause disordered fluctuation, there are feedbacks during the mutual learning process of people’s behavior and market behavior, the market uncertainty plays a role in stabilizing the market behavior, and the final conclusion is that one of these volatility is cause by several behaviors, and different factors could result in different volatility, which was known as the Phase Shift theory.The main objective of this paper is not to make a precise prediction of future, or not to deny the previous theories, but to make a research and analysis on the stock market from an overall angle. The market uncertainty should not be viewed as a kind of risk, but should be viewed as a key factor which keeps maintaining market stability to some extent, from which we can achieve a better life and the society could be more harmonious.