Research On The 'Good Name' Effect In Chinese Stock Market

The Chinese stock market has achieved rapid development since it was established in 1990.Among all the hypotheses of modern economy,the Efficient Market Hypothesis(EMH)is always one of the most important basic theories.However,the traditional EMH is challenged by many actual theories at present.There exist a lot of abnormal phenomena that cannot be explained by traditional financial theories.In stock market,investors,especially minority investors,are unable to get a comprehensive understanding of the financial market and have no access to an overall research of a listed company.As a result,they judge the company performance rarely from their first impression of it.The abbreviation of a company is what investors at first get to know,so investment judgment may be affected by favor of some 'good names'.Traditional Chinese culture has been exerting a great impact on Chinese people.Chinese investors may inevitably have a favorable impression on auspicious words.When it comes to Chinese stock market,companies with 'good names' may inevitably raise more concerns than others.The thesis researches the 'good name' phenomenon in Chinese stock market based on database from CSMAR.Firstly,the related research background,review literatures about EMH,Behavior Finance and name research are introduced.Secondly,the behavior finance theories is analyzed and the definition of 'good name' is put forward.In this section three hypothesis are suggested and each hypothesis is tested by a model accordingly.Empirical analysis is conducted based on the data of 1069 companies in A-share market,from 2010 to 2015.At last the conclusions and the relevant political suggestions are presented.The conclusions of this thesis can be divided into three points:1)Companies with good names draw much more attention from minority investors,who have more confidence and interests in them.2)Companies with good names are traded more frequently:when exchange rate is higher,the liquidity is stronger,which suggests that investors show more enthusiasm in them.3)Companies with 'good names'are valued higher than those with 'normal names'.In general,the 'good name' effect exists in Chinese stock market,which reflects more attraction to minority investors,more liquidity and higher valuation.