The Influence Of Social Interaction To The Stock Market Of Our Country

Traditional portfolio choice theory holds that investors should invest in the capital market to follow the principle of risk diversification, that is, "Do not put all your eggs in one basket," but to diversify investment in different assets. Investors' investment propotion of each asset depends only on investors' appetite for risk, all investors will have a certain percentage of assets invested in risky assets in theory. However, scholars from America, Italy, Pakistan and China found that predictions from the traditional theory very different with reality, families' portfolio choice is not consistent with the traditional asset selection theory, stock is the most important risk asset, but many people do not invest in stocks, even they participate in the stock market they did not hold all types of stocks, real data is much lower than the theoretical optimal risk asset holdings share, so, this is the limited participation problem in stock market.As China's financial market matures, wealth of household is gradually accumulating, more and more families take participate in stock market. However, there are still serious problem about limited participation in stock market.2011, The proportion of households involved in the stock market was 8.84%, The proportion of stock in total household financial assets was 15.45% (Gan Li et al., 2012). Stock limited participation phenomenon has become the focus that studied by lots of scholars at home and abroad. Those scholars have achieved greatly on this phenomenon. Scholars have put forward an important theory called "social interaction theory" which is the most vital theory of already achievements. Social interaction means decision-making on investment of individual influenced by the behavior or characteristics of relevant referential members which belongs to one group.(here referential members differs from study circumstances to another. Common referential members used by scholars include family, neighbors, friends or colleagues, etc.) Influences on individual's investment decision-making,which exerted by referential members, are realized directly by interaction between individuals rather than the market price mechanism or non-market contractual mechanisms. So, how the family investment decision-making influenced by social interaction? What is the mechanism of social interaction is? That is what this paper research on and why do this.In the study of mechanism of social interaction, foreign scholar Manski (2000) divides it into two types:endogenous interaction and interactive scenarios. According to this, Chinese scholar Li Tao (2006) summaries the channels of endogenous interaction into three categories, namely, the mechanism of information acquisition, the mechanism of communication and the mechanism of social regulation. Zhou Mingshan etc. (2011) regard the limits of social regulation mechanism as the relative mechanism of wealth-focus in their research. Based on the above theoretical research, this study divides the endogenous interaction into mechanism of information acquisition, the mechanism of communication and the mechanism of relative wealth-focus. In order to do the empirical test for these three mechanisms, the author sets three relating research hypotheses by treating the family information, the participation rate of community stock market, and the difference of community income distribution as the variables. Furthermore, the author also adopts the data of China Household Finance Survey in 2011 and the models of Probit and Tobit to test the regress consisted of family participation rate of stock market and the depth of participation. It is obviously presented that it is not remarkable of social interactions to push the families joining the stock market if the main information source is social interaction, while it is more remarkable in the communities in which the participation rate of stock market is high and difference of incomes is rare. Therefore, it could be concluded that the mechanism of communication and the mechanism of wealth-focus would receive the support for statistical data.