A Study On The Causes Of Excessive Volatility In China's Stock Market Based On The Pricing Model With Heterogeneous Belief

From July 2014 to 2015,the Chinese stock market experienced ups and downs.This series of large changes in Stock market have impacted the domestic and international financial system resulted in a great loss of investors.Causing the attention of the scholars at home and abroad to our country stock market excessive volatility and they have conducted a series of research and analysis from the aspect of macroeconomic,market structure,financial regulation,mechanism defects,investor sentiment and so on with different theories.This article does some study on the Chinese stock market mainly from the perspective of behavioral finance.Firstly,provide evidence for the existence of excessive volatility in China's stock market from three aspects.(1)Visually shows the obvious characteristics of excessive volatility in the Chinese stock market by stock index time series,the contrast of stock index and macroeconomic,the contrast of stock index and the business conditions of listed company.(2)Testing the stock market bubble in China by Tobin Q ratio and bubble coefficient,the results illustrate the stock prices are deviate from its intrinsic value and inflationary slumps happened from time to time,which provide preliminary evidence for the existence of excessive volatility in Chinese stock market.(3)Then it is in progress of regression between future rates of return and past rates of return,which shows that there is a negative correlation between future rates of return and past rates of return,namely.The above show the excessive information response of the stock market price to the existing information,which support the hypothesis strongly and prove the excessive wave phenomenon exists in the Chinese stock market.In addition,have do a preliminary examination on the investor sentiment and the fluctuation of stock price,which shows that investor sentiment is one of the reasons for the stock market volatility.The correlation between our share price and investors' expectations have been confirmed.In above foundation,taking the heterogeneous beliefs investors into traditional asset pricing model,dividing the market's investors into three categories and finally build the equilibrium asset pricing model which based on investors' heterogeneous beliefs.The model concludes that the level of investor heterogeneity is directly proportional to the equilibrium price of the asset.Using the adjusted market turnover rate as the direct proxy variables of the investors' heterogeneous beliefs and using the GARCH-M model to do some test on this conclusion.Here are the conclusions:(1)There is a significant positive correlation relationship between the Chinese stock market investors heterogeneous beliefs and thecurrent stock index returns.When other factors remain the same in the market and just consider investors' heterogeneous beliefs,the stock price will be change into a positive direction with the investors' heterogeneous beliefs.(2)The systemic risk which caused by investors heterogeneous beliefs has positive influence on the stock index returns.(3)There exists a negative correlation relationship between the investors heterogeneous beliefs and the late stock index returns,When the degree of the current heterogeneous beliefs is very high,late yields will decrease,the overvalued part of the current share price which is caused by the heterogeneous beliefs will gradually be fixed in later time.Finally confirmed that the Chinese stock market exists the phenomenon of excessive volatility.In the solution of that other factors in the market unchanged,Investors' heterogeneous beliefs can still do some impact on the stock market price and the yield,make the stock price overestimated in short period,and create the systemic risk.Therefore,the change of investors' heterogeneous beliefs is one of the systemic causes of the excessive volatility of the Chinese stock market.In addition to consider the causes of the excessive volatility from the macroscopic perspective,should also consider from the perspectives of microscopic investors' psychology and expectations.and behavior,such as the factors which can affect the degree of heterogeneous beliefs.Relevant policies and measures can also be considered from these aspects.Both the investor's heterogeneity and the factors that influence the degree of heterogeneity of investors should be taken into account.Finally,has given some suggestions from the perspectives of the information flow,the investor characteristics and the capital flow.