Who Is The Noise Trader In The Capital Market ?

The Chinese stock market is full of noise that has nothing to do with stock information but influences the trading decisions of market participants.Some market participants mistakenly regard noise as useful information to conduct trading activities and they are noise traders.The existence of a large number of noise traders makes the price of securities not reflect the current value or even greatly deviate from the companies' actual value so that all investors in the market must bear additional noise trader risk besides system risk and the companies' fundamental risk.Studying the noise trader risk in Chinese stock market is helpful to find out the main noisy origin of Chinese stock market,so as to propose suggestions to reduce the noisy level from the source,to efficaciously improve Chinese capital market's efficiency,and to maintain the healthy and stable development of Chinese stock market.This paper aims to compare and analyze the level of noise trader risk between different types of investors in the Chinese stock market,and further analyze the correlation between noise trader risk and stock returns.Based on the review of theoretical and empirical literature on noise trader risk of domestic and foreign research,this paper argues that in Chinese immature capital market,the root cause of noise trading is cognitive bias of market participants and information asymmetry.In view of this,this paper uses all the stocks in the Chinese stock market as a research sample,and compares and analyzes the level of the noise trader risk of different stocks.At the same time,according to the characteristics of investors in Chinese stock market and long-term trading situation,this paper further analyzes the correlation between noise trader risk and stock returns,and introduces control variables for regression analysis.The results show that different types of investors in the Chinese stock market have different levels of noise trader risk,and the noisy level of some institutional investors is not lower than that of individual investors.Comparing the noisy level and return rate of different investors,it is found that QFII fund investors have the significantly higher level of returns than other investors and the lower level of noise trader risk than other investors.QFII fund investors are typical rational investors in the stock market.The correlation analysis between noise trader risk and return rate shows that the level of securities returns is significantly negatively correlated with the noise trader risk.After the introduction of control variables,the noise trader risk level is still having strong explanatory power against the return rate.The related research and analysis results of this paper have a very positive practical significance for the comprehensive understanding of current situation of noise trading and investors in Chinese stock market and have a certain guiding significance for investors to perform more reasonable asset allocation.