Research On Investor’s Behavior Based On Utility Function

In recent years, the trend of financial globalization has become increasinglyclearly that it promotes the development of the world’s economy to achieve theoptimal allocation of resources. But at the same time, it can’t avoid to produce visionsand volatility in financial markets. Traditional financial theory has been unable to dealwith this era of change, scholars have long been gradually transformed from atraditional research on stock prices, dividends, income for the investor psychology inthe financial markets, preferences, investor decision-making process research.The financial crisis in2008have sounded the alarm to economics scholars thatthe crisis, in addition to questioned the reasonableness of the existing financial system.Thus, the theory that fits the actual situation in the financial markets, calledBehavioral Finance, points out the direction of our research,and becomes a powerfultool for vision research in financial markets.Investors are assumed in the presence of behavioral finance concept that theyhave individual preference or bias, and also the phenomenon of loss aversion, that is,in the face of risk, people’s preferences are not consistent. When connected to therisks with benefits, it is expressed as risk aversion; When connected to the risks withlosses, people are more willing to seek risk.For these reasons, this paper, based on the framework of prospect theory,composites the results of a comprehensive study of economics, psychology, finance,mathematics and statistics, and many other disciplines to investor psychology inmajor stock markets of the research, objected to the utility function model, usingMatlab, Excel and other programming tools and Gamma function examines the utilityfunction theory to explain the behavior of investors, and uses the Chinese stockmarket stock index to test theoretical results, respectively. The results show that theloss aversion parameter of China’s major stock markets is between1-3and the lowerlimit of the loss aversion parameter increases with the difference of the curvatureparameters The main board market for investors to invest in risky assets brought forinvestors with more sensitivity to the loss with respect to the SME board and theGEM board, which means that there is a greater loss aversion parameter. This study for the theory of behavioral finance has been deepening andinnovation, not only conducive to investors scholars to develop a more in-depthresearch, but also convenient for regulatory authorities to manage financial marketfrom the micro-level, guide small and medium investors to act rational investmentbehavior, improve investment decision-making ability of the stock market, andpromote the healthy and orderly development of the economic system.