Research Of The Noise Trader Risk In Chinese Stock Market

If there is a lot of "noise" in the stock market, some investors will take these"noise" as "information" to do investment decisions?and these investors are called noisetraders. Due to the existence of noise traders, the stock price cannot fully reflect thecurrent information, the investors will take additional risk besides fundamental risk,namely the noise trader risk. Study the noise trader risk in the Chinese stock market andexplore its influencing factors, are in great meaning for reducing the level of noisetrading in Chinese stock market, improving the efficiency of Chinese stock market andmaintaining the stability of financial markets.The purpose of this paper is to explore the level of noise trader risk in Chinesestock market, and further analyze its influencing factors. Through reviewing thedomestic and foreign research of relevant theoretical and empirical literature, this paperargues that information asymmetry and cognitive bias is the basic cause of noise traders,and different market segments can reflect different information transparency and typicalinvestors cognitive biases in different market condition. Therefore, based on the datafrom Chinese stock market, this paper comparatively analyzes the noise trader risk inthe main board and GEM market in China, comparatively analyzes the noise trader riskin the American stock market and Chinese stock market, and comparatively analyzes thenoise trader risk before the financial crisis and after the financial crisis. According to thecharacteristics of the Chinese stock market and the relevant literature, in combinationwith the cause of noise traders, this paper further puts forward the multiple factors thataffect the noise trader risk, and carries out a regression analysis.Results show that no matter in main board and GEM, the noise trader risk issignificantly greater than zero, and the noise trader risk in GEM is significantly greaterthan the main board. The comparative analysis of Chinese and American stock marketshows that the noise trader in American stock market is significantly greater than zero,but it significantly less than Chinese stock market. The result of comparative analysis ofnoise trader risk before and after the financial crisis shows that the noise trader beforethe financial crisis is significantly greater than that after the financial crisis. The resultof the analysis of factors affecting noise trading risk shows that the ratio of institutionsholding, dividend per share and total amount of dividend have a significantly negativeimpact on noise trader risk. Investor sentiment have a significantly positive impact onnoise trader risk. The analysis and results of this paper are in great meaning forunderstanding the noise trader risk in Chinese stock market and making relevantpolicies.