Research On The Contagion Of Positive Feedback Trading In Stock Market

Positive feedback trading is one of the important research contents of behavioral finance theory and it is essentially a kind of non rational investment behavior.In short,positive feedback trading is that investors buy in when the prices is rising and sell out when the prices is falling,also is we usually say "chasing Shadie".In the securities market,the stock price may have a big difference with its basic value due to the existence of positive feedback traders,even lead to a serious price bubble.After the bubble burst,the huge impact on the economy and the strong negative effect on politics can not be ignored.The research on positive feedback trading makes up the shortage of traditional finance,which provides a useful reference for the formation,development,climax and burst of the securities market price bubble,and the volatility and risk of the stock market.The paper systematically expounds the related theory of positive feedback trading,applies the GARCH model and the Log-periodic Power Law(LPPL)model to carry out the quantitative empirical test on the positive feedback trading behavior of investors in China's securities market.The study found that in our country,both the Shanghai stock market investors and the Shenzhen stock market investors are showing obvious positive feedback trading characteristics.And the positive feedback trading behavior of investors is contagious to some degree.The contagion of positive feedback trading is obvious in the same market,while it is not obvious between the different markets.Taking the bank and the oil as the representatives,different industries also exist different positive feedback trading and transmission characteristics.On this basis,the article puts forward some suggestions on how to regulate the development of China's securities market and how to make rational investment.