China's A-share Market Over-trading Research

Trading volume is a specific amount of Securities investment targets in a certain period of time. The change in volume reflects the changes in the supply and demand of investors. In general, volume with no large exogenous shocks in the market is stable. According to rational person hypothesis of the standard finance theory,we can naturally obtained the following conclusions: at any time, the decision that seller's investors make is rational, the judgment before decision-making with the actual situation of the market does not exist deviation, that is the stock the seller investors has sold will fall but will not rise, and at the same time, as the buyer of the rational investors,they apparently also can realize the stock that the seller sold could only go down so would not buy the stock that the seller has sold, in this case, the market will be only very little turnover, and the turnover is only for investors to adjust the allocation of assets or to meet liquidity needs, which with the reality of great volume obviously does not meet. Obviously, the standard finance cannot explain the huge volume on the market every day, but can not explain the obvious differences in the volume of different technology cycle and economic cycle.Fortunately, behavioral finance developed around the 1980 s provides a good direction for the abnormal changes in the interpretation of trading volume, the behavior finance study the decision-making behavior of the investors by the psychological characteristics from the people to make decision. Behavioral finance relaxed assumptions under ideal conditions, and mainly focus on the real market participants-investors.because the human being are more susceptible to knowledge, cognitive and psychological fluctuations. especially in uncertain market environment, people are more difficult to achieve rational. countless irrational market participants act on the market to naturally make the financial market also showed irrational transactions, and the visual performance is the price of disorderly fluctuations and excessive trading. This excessive trading in our A-share market was particularly evident, on the one hand seriously damaged the interests of investors, on the other hand, excessive trading exacerbated the stock market volatility, so it is not conducive to long-term stable and healthy development of the stock market. Excessive trading phenomenon on A-share market has been a headache for regulators who also developed a number of policies related to reduce excessive trading behavior of investors, but the effect is not obvious. To really solve the excessive trading, you must figure out the underlying factors behind the excessive trading, instead of making some marginal policy based on surface phenomena of excessive trading.This article attempts to use the theory of behavioral finance to explore the real reason behind the excessive trading of A shares market.In the course of the study, it mainly draws on the theory of over confidence and prospect theory,In the research, one of the most common methods used in the study of behavioral finance is the way of questionnaire investigation. it had the psychological characteristics of the changes of 416 kinds of investors in the face of different market environment though the elaborate design problems. The results showed that the A-share market excessive is not mainly because of a lack of knowledge of the investors and like trade frequently lead to, but excessive trading behavior of investors is often because the face of China such a system is not perfect market for captive and forced to passive choice. Second, investors do not always appear to be over confident, only when in a bull market gains of more than 20 percent would gradually over confident, the excessive trading behavior of other often is because investors psychological reference point resulted from the changes of the hearts of different types of investors and reference point changes are different. These differences constituted to the different stages and timing of the different properties of excessive trade volume. In addition, the research of this article still has an important discovery: investors in the value of the function above reference point is not always the risk, the risk is not always at value function reference point. In the important position of some investors believe that, the investor's psychological reference point will rapidly change, risk seeking may suddenly become a risk aversion, and risk aversion may suddenly become a risk seeking. Based on the results of these studies, this article further puts forward to some suggestions on how to reduce the excessive trading.