Research On The Home Bias And Causes Based On Shanghai-Hong Kong Stock Connect Program And Shenzhen-Hong Kong Stock Connect Program

According to the traditional portfolio theory,diversification and decentralization are the ideas that investors should have in investment practice.Nowadays,in the era of economic globalization,the portfolio held by investors should have the characteristics of internationalization.However,in the actual investment,investors are more inclined to invest most of their funds in the capital market of their own country or region.The weight of investment in their own country or region far exceeds the recommended value of portfolio theory,which is the phenomenon of home bias.This paper reviews the definition of home bias in the existing literature,and summarizes the scholars' research on the development trend and influencing factors of home bias.This paper expounds the quantitative method of home bias from the theoretical level,and analyzes the channel restrictions,policy restrictions,information asymmetry,macroeconomic factors,investor experience,behavioral financial factors that cause the phenomenon of home bias.This paper focuses on the emerging behavioral finance theory,selects investor sentiment as an innovative influencing factor,and discusses the theoretical mechanism of investor sentiment influencing home bias through cognitive bias.Next,this paper collects the quarterly data of Chinese stock market and Hong Kong stock market from March 2011 to March 2019,then uses the difference method to measure the home bias index of the two markets.Taking the mainland market of China as a representative,this paper selects five source indexes of investor confidence index,turnover rate,P/E ratio,closed-end fund premium rate and the number of new investors to build a composite investor sentiment index,establishes a regression model,and conducts an empirical study on the impact of investor sentiment on home bias.The results show that home bias index is negatively correlated with investor sentiment index.Investor sentiment also affects the actual investment proportion and the optimal investment proportion in the calculation formula of home bias.When the market performs well and investor sentiment is high,investors tend to invest higher proportion of funds in the domestic market to increase the actual investment proportion of the country.At the same time,investors enter the market one after another and a slew of funds enter the stock market,leading to an increase of share price.The market value of the country accounts for the global market value.The effect of the latter is stronger than the former.The rising investor sentiment has a greater impact on the rise of market capitalization,which ultimately leads to a negative correlation.Chinese investors have obvious home bias,which is affected by the fluctuation of investor sentiment,indicating that the capital market and investors are not fully mature.We should open the capital market reasonably and create more opportunities for investors to choose different assets in different regions.Investors' own investment knowledge needs to be supplemented,investment strategies should be refined,and a more optimized portfolio should be constructed.