Analysis On The Effect Of Noise Trading For Earning Rates In China’s Stock Market

In the financial market, there are a lot of abnormal phenomenon that the standard finance can’t explain.For example,the equity premium puzzle, the excessive volatility in the stock marketThis kind of phenomenon that is based on the efficient market hypothesis of standard financial theory is facing more and more challenges. At the same time, behavioral finance made contribution to the theory and considering the people’s psychology, emotion and behavior as the factors of asset price.In the end, the theory of noise is established.That the earning rates affected by noise trading is a significant problem in reform and opening-up and building a stable stock market in China.Since Chinese stock market has been established, noise trading market phenomenon is obvious. For example, herd behavior, overconfidence, excessive speculation and stock market bubble and so on. It is an important aspect to reduce the noise trading, keep the normal stock market volatility and financial market stability and improve the efficiency of stock market.There are two kinds of stock market participants, respectively rational arbitrageurs and noise traders. Due to the existence of noise trading,assets price is deviating from the asset equilibrium price. In this paper, firstly,a summary on the theory of noise trading is discussed under the perspective of behavioral finance theory.Then we can verify the existence of noise trading and use the TARCH and EGARCH model to analyze asymmetric shock as to the news.And building the index system is to measure the influence of noise for the earning rates.In the end,we can take relevant countermeasures to reduce noise trading and build a stable market in the three aspects of government, market and investors.