A Research On The Price Deviations Of Chinese Stock Market With Heterogeneous Belief Theory

Based on the heteroge neous belie f theory, we assume that there exists a marketwhich cons ists of ma ny kinds of investors with bounded ratio nality and heterogeneousprior belie f. The n, we get the equation o f market price and price deviation. Us ing thefitness functio n and the cho ice intens ity, we conc lude the relations hip betweenproportion of investors and price deviatio n. This relations hip shows that the higherthe fitness function of one belie f, the bigger the proportion of investors who us ing thisbelie f. If this belie f is fundame nta l belie f, the investors will he lp to stabilize themarket and the price deviatio n will be restored; if the be lief is trend chas ing be lief,the investors will expand the instab ility and volatility. Cho ice intens ity measures thespeed at whic h investors change fro m one belie f to another belie f. The bigger choiceintens ity is, the faster investors make change. In the third chapter, we make numerica lsimulations. The result ind icates that the mo veme nt of price deviation is comp lex.Proportion of investors and choice intens ity will both affe ct the restore maps ofdeviation. We make emp irical evidence in chapter four using a comb inatio n offunda menta l belie f and trend chas ing belie f for Chinese stock market. The samp lecovers four indexes with period fro m2002to2011. The results are as fo llo w:First ofall, the model of heterogeneous be lief is muc h better than the model o f homo geneousbelie f. The over-volatility of these indexes in2002-2003and2007-2008are for thesame reason. Positive information pushes the increase of proportio n of funda menta linvestors and price. And then the high price increases the fitness functio n of trendchasing investors. Because of this increase in fitness functio n, the proportio n of trendchasing investors goes high and the deviatio n goes high too. In the meantime, theproportion of each kind of investors doesn’t reach to zero or one. This means any typeof investors has no enough power to monopoly the market. Finally, the coeffic ient ofrisk avers ion is about3for the samp le. The investors of Chinese stock market exhib itrisk aversion.