A Study On How Background Risk Factors Affect Share Market Participation Among Chinese Urban Residents

Traditional portfolio theory only takes into account of the risk characteristics of financial assets,but in reality,the risks faced by investors include not only financial rick,but also background risk.Research on the effect of background risk to Chinese urban residents' participation in the stock market promotes long-term development of China's capital market.Through literature study,we summarized the research outcomes of background risk areas in recent years.Through theoretical research,we found that bigger background risk leads to a decrease in the ratio of risky financial asset holdings.In the part of empirical research,we constructed a series of variables which we need in the models.Through HP filter method,we can get the cycle fluctuation component of these variables,and use it to indicate the risk of each background risk factor.We use quarterly data from 2013 to 2015 and panel data of each province from 2005 to 2014 to constructed VAR model and the panel model,demonstrates the effect of background rick to the urban residents' participation in the stock market.The empirical results show that background risk factors significantly reduce the participation,and they can explain the variance of the ratio of new accounts and new investment as good as market return rate.Eastern provinces have high stock market participation and are sensitive to the market factors;Middle and western provinces have low stock market participation and are more sensitive to background risk.