Heterogeneous Beliefs?the Sustainability Of Earnings And Stock Price

Traditional stock pricing theory is based on the assumption of homogeneous beliefs which think that the investors have same expectations for stock returns and the same volatility of price.However,because of the weak efficient market and asymmetry information,investors have different expectations for one stock in the reality of the capital market which we define this phenomenon as heterogeneous beliefs of investors.Studying the heterogeneous beliefs has very important practical significance due to the large proportion of individual investors in Chinese stock marketGenerally speaking,research on the stock price is based on the earning information to do theoretical and empirical analysis of listed companies.However,none of these theoretical research and empirical analysis take the factors such as heterogeneous beliefs into account.Including the factor of heterogeneous beliefs,this paper chose ashare companies listed on the Shanghai and Shenzhen stock exchange from 2007 to 2015 as research object to analyze the correlation between the sustainability of earnings,heterogeneous beliefs and stock price.The study found that higher sustainability of accounting earnings has positive significance on the stock pricing which indicated that our Chinese securities market can differentiate the different types of earnings according to the sustainability.The factors of heterogeneous beliefs have significant positive influence on the stock price while the heterogeneous beliefs have negative influence on earning information' pricing.