The Research On Measures And Causes Of Overreaction Phenomenon In Stock Market

The traditional theory of finance holds the view that the stock market is weak or semi-strong,and the stock price is a reasonable reflection of the open information.However,this conclusion has been challenged theoretically with the realities of financial markets.In1985,DeBondt and Thaler concluded there was the overreaction phenomenon in stock market of USA.It was not only the beginning of the struggle between the behavioral finance and the traditional financial,but also the reintegration of the development.Overreaction is not only found in the stock market of US,many other countries have also found it in the stock market several times.It has been unable to make a reasonable explanation with the existing effective market hypothesis,so the foreign behavioral finance theory mainly explained the phenomenon of overreaction from the psychological side.So,is there any overreaction in the stock market of China?If so,what are the causes of the overreaction phenomenon?According to the background,the paper studies the overreaction in the Chinese stock market.First of all,this paper briefly introduces the related research of the overreaction,and reviews the studies of the overreaction at home and abroad.It sums up the various empirical and theoretical explanations of the overreaction in history,and it also initially determines the way that defines the overreaction model and method.It mainly takes the industry index as the research object,and constructs the mathematical model of the macroscopic aspect as the explanatory variable based on the CAPM.The paper defines and judges the over-reaction of the securities market based on the residual analysis method.And it can validate the existence of overreaction through the improved model.Based on the theoretical analysis,this paper chooses the index data of the Shenzhen Stock Exchange to study the phenomenon of overreaction and its causes.The empirical results show that there are obvious overreactions of Shenzhen IndustryIndex in the short term,and the number of reverse reactions in different industries is significantly higher than that of positive overreactions.The added dummy variables can explain the overreaction phenomenon well,and macro policy,industry information and investor sentiment are the main causes of overreaction.Based on the established model and the related theories and empirical research results of behavioral finance,this paper puts forward some suggestions on the two aspects of government and investors from the actual characteristics of Chinese stock market.