On The Irrationality Of The Chinese People In Shanghai From 1921 To The "News"

A financial crisis occurred in Shanghai in1921which was characterized by a surge of establishments and shut-downs of stock exchanges and trust companies within several months. We collect the stock prices, trading volumes and other related information of seven major stock exchanges and five trust companies at the time. We argue the bubble-shaped stock prices of six stock exchanges are consistent with the theory of "intrinsic bubbles" caused by the introduction of new technology. However, the Shanghai Stock Exchange of Certificates and Goods (SSECG) possessed an upward price trend until Feb1922while the stock prices of other stock exchanges collapsed as early as July1921. We argue that this price trend of SSECG is due to its excessive information reveal which made investors believe that they could ride the bubble for a certain period. After this financial crisis, company stocks couldn’t be found in the exchanges for a long period because investors hated and feared them. Today’s securities market of China is still very young, and needs to be improved in many aspects such as risk disclosure, investors’ structure and concept.