The Analysis Of Irrational Behavior Of Investors Based On Long-Short Strategy

In recent years,it becomes more and more difficult for traditional finance theory to explain abnormal phenomena which is based on CAPM model and APT model.In contrast,behavior finance(BF)emerges,which is combination of finance and psychology.Behavior finance broke through "completely rational person" hypothesis of traditional finance theory,it originates from investor behavior,set "limited irrational behavior" as starting point of research,and successfully explained many abnormal phenomenon which is unable to be explained before.This article is based on aspect of BF to do research on irrational behaviors of investors,testing weather universal regulation of BF holds as well in Taiwan future market.This article focus on three common irrational behaviors:frequently trading(overconfidence),selling winners and holding losers(disposition effect),and being superstitious to integers.This article is based on theory and empirical study of BF,and is based on all round dataset of Taiwan future market.Firstly,we test the existence of irrational behaviors,and explained causes of those phenomenon in aspect of BF.Apart from that,we test consequences of those irrational behaviors by different empirical models.For accuracy of conclusion,we analog investors by institutional/individual,long/short etc,which is according to different,and make comparison in order to have further recognition of different types of investors.The conclusion of this article is consistent with that of foreign scholars.We can see from conclusion that,in limited rational condition,irrational behavior of investors from all over the world have similar characteristics.Three irrational behaviors above are all exist,and cause losing or deduction of profit.Overall,however,institutional investors with larger scale,more professional knowledge,have less level of irrationality,causing relatively less serious consequences.On the contrary,irrational behavior of individual investors has long and widespread existence,which is significant causes of overall lose.As the saying goes,"Seek Input from Your Opposites",research of this article in focus on investors in Taiwan,despite that Taiwan future market has less scale than Chinese Mainland and western countries,conclusion in this article can still be benefit for improving supervision level of A share market and future market in China and protecting and educating individual investors.