Information Transmission And The Change Of Stock Market In China

Information is the basis for investors to develop investment strategies, which directly affects the trade process and asset price behavior in financial market. It helps investors to understand the operational mechanism of stock market deeply that studying on the information transmission process. At the same time, the reaserch enriches financial market microstructure theory and provide guide to investors and regulators. Therefore, we analyse the information transmission process and the relationship between information and the market in the paper. The summary of the main content are as follows:First of all, we divide all the traders into information based traders, the noise traders and liquidity traders based on the analysis of the market investor’s structure. Then we build an equilibrium model that considering the noise traders, information traders and liquidity traders. The result shows that the proportion of noise traders and information traders has important influence on the equilibrium. The equilibrium price gets closer to its real value with the increase of information traders and noise traders. At the same time, noise traders lead the equilibrium price deviate from its real value if the liquidity traders have no ability to learn from trading, and it makes equilibrium price gradually return to the true value if the liquidity traders have the ability to learn from trading.The classical models assume that there are only information based traders and liquidity traders, which violates from the facts. We build a dynamic learning model that considering noise trading investors to overcome the imperfection of classical models. Then, we analysis the relationship between traders by this model. The results show that the traders have the ability to learn from trading flow in A-share market, they can adjust their strategy according to the previous arrival rate, but the order flow information shock subsides quickly in A-share market.In the third part, we describe the percentage of information based trading and the noise trading in A-share stock market by the dynamic learning model. Further more, we compares the percentage of information based trading and the noise trading of different market status. The results show that liquidity trading account for a large proportion in A-share market, and the market status has influence on the trade structure while the size of listed company not. In addition, the probability of information trading increased obviously when there is extreme return market, and both the probability of information trading and probability of noise trading increased when the volatility is extreme large.The fourth part of the main content analyse the relationship between information trading as while noise trading and the behaviour of traders. The results confirm that the traders become more active when the proportion of noise trade get larger, but the influence of information based trade on the degree of activity is not significant.The fifth part of the main content analyse the relationship between information trading as while as noise trading and the behaviour of price in stock market. The results show that the spread of quoted price expands when the proportion of noise trading and the proportion of information based trading gets higher. At the same time, this reaserch also proves that the proportion of noise trading and the proportion of information based trading gets larger can bring risk to the market.