The Empirical Research On Futures Market Intraday Price Performance And Overreaction In China

Behavioral Finance builds on the basis of market participants who are not alwaysrational. They make investment decision under the principle of bounded rationality、limited self-made. Because investors are not always rational, so behavioral bias andother factors will effect their decision. This behavioral bias can lead investors tooverreact to market information and cause price deviate from its fundamental value.The domestic research focuses on the stock market and think that our stockmarket exists overreaction phenomenon. Seldom papers research the futures market，but as a part of financial market, futures market and stock market relate to each other.As stock market fluctuates, the futures market trading volume had increased sharply,we should think about the reasons behind intraday price volatility and trading activity:if the volatility of futures intraday price responses to the information impact correctly,then the fluctuation of futures intraday price results through the development offutures market; if the fluctuation of futures intraday price is caused by irrationalfactors mainly, then it needs to take measures to regulate the futures market.Considering the futures and stock market have in common, we may speculate futuresmarket can exist overreaction phenomenon too.The paper reviews the domestic and abroad literature on overreaction firstly.Then paper analyses the relationship of futures and stock market and the cognitiveand behavioral bias of the individual investors, institutional investors and regulatorsof futures market from the perspective of behavioral finance, theoretical analysis thinkthat the future market exists overreaction possible. Lastly the impirical research ofpaper test makes conclusion:（1）Futures intraday price overreacts to stock market overnight returnsfluctuation. Overreaction phenomenon exists magnitude effect, which implies thelarger the overnight return of stock market is, the larger will be the reversals in thefutures intraday price from market open to market close. And copper and aluminumfutures contracts do not exist market maturity effect, yet rubber futures contract existsmarket maturity effect.（2）Futures market exists investors emotion cam-down effect, it implies thatoverreaction reduces or does not exist on Monday significantly. These observationssupport the explanation that the source of overreaction lies in investors behavioralbiases and investor behavior model may also explain the existence of overreaction.Market maturity and investors emotion cam-down effect can reduce degree of overreaction.（3）The contrarian strategy that uses overreaction can generate positive profits,and the larger the fluctuation of the stock market overnight return is, the larger will bethe profits. This conclusion can provide reference for investor investment strategy.