Research On The Causes Of Price Deviation In China’s Stock Market

The stock market is an inseparable and indispensable part of China’s capital market.After more than 30 years of development in China’s stock market,the stock market has become more and more important in China’s economic development.From micro perspective,the dynamics of the stock market can play a role in obtaining funds for enterprises;frommacro perspective,The dynamics of the stock market can better reflect the situation of China’s economic development,and at the same time,it plays an important role in optimizing resource allocation and promoting economic development.During the gradual development of the stock market,the market scale has become more and more large,the investor’s type has shown a diversified trend,investors are increasingly characterized by high enthusiasm,the market management system tends to be rationalized,and the market laws and regulations has also become complete.However,there is a phenomenon for stock prices in China’s stock market.The market price of a company’s stock is often inconsistent with the basic price estimated by company’s intrinsic value,which means that there is a difference between the stock market price of the company and its basic price.What factors will affect the company’s stock price deviation or can reasonably explain this phenomenon,it is the problem to be explored in this paper.The research sample of this paper is thirty companies that have been trading continuously between 2008 and 2017.Using the panel data model,it is explored whether investor sentiment and risk premium will affect the deviation of China’s stock market price.The study found that the risk premium of the relevant accounting indicators of the enterprise which are captured by the Fama-French three-factor model,the risk premium of macro-economy variables which are captured by the capital asset pricing model and investor sentiment will affect the price deviation of the stock market in China.Among them,the profit price of the enterprise(the reciprocal of the price-earnings ratio)and the investor sentiment will have a significant negativeimpact on the price deviation of the stock market in China,and the book-to-market ratioof the enterprise,firm size,GDP growth rate and M2 growth rate will have a significant positive impacton the price deviation of the stock market in China.But the impact of stock market yields on this price bias is not significant.Based on the research results of this paper,for investors,it is necessary to establish a rational investment philosophy by increasing their knowledge reserves.Due to the serious information asymmetry problemand a strong speculative atmosphere in China’s stock market,investors have less effective information,therefore,investors must make rational investment analysis before making investment decisions.If investors invest blindly,it will cause stock price deviations in the stock market,which will increase the stock market bubble,which is not conducive to the stable operation of the stock market.For the relevant regulatory authorities in China’s stock market,in order for China’s stock market to operate under a healthy and stable condition,the regulatory authorities should actively guide investors to make rational investments to prevent investors from becoming victims of the stock market.For the government,it is possible to control this price deviation in China’s stock market through some macro-control measures to ensure the stable operation of the stock market.