A Research On The Noise And Its Impacting Factors In China Stock Market

The concept "noise" was firstly introduced into the field of finance from physics by supporters of efficient market theory, including Kyle, and was defined as the opposite of the "signal". Both of these two things involve information, but "signal" contains true information which reflects the change of the foundation of the object or the fluctuation of the macroeconomics situation. On the contrary, "noise" covers wrong or non information. These original researchers did not give enough attention about the impact of the noise to the trading prices of the risky assets. Then, concerning the obvious unconformity between the efficient market theory and the market realities, new emerging behavior financial theory builds up noise trading theory and believes the investors'trading put the noise into the trading prices which reflect both the noise and the information, and then lead to the limitation of arbitrage and make the market hard to be efficient. According to the forming institution and expression of the noise in the market, we define the nature of the noise as the summation of all the factors that result to the investors'mispricing to the objective risky asset and its biased estimation of the future value. "Noise" affects not only the trading prices but also the trading volume in the market, and is involved in every individual trading. Based on this concept, this article makes research and examination from the angles of founding institution, representation, measuring methods, and impacting factors.In the financial markets of various countries, macroeconomics situation, foundation of the firms, information asymmetric, and the investors'emotion influence the volume of the noise trading and the noise component involved in the trading prices, and the difference is only about the extent.In both Shanghai and Shenzhen stock market, the total market value increased with the economic growth, but most part of the investors are middle and small ones, although the ratio of the institutional investors has a trend of increasing. By means of EGARCH model, we find the yield of the representative portfolio in two markets tend to be clustering. And "bad" information brings more strike to the conditional variance of the portfolio than "good" news, which means the impacts of these two kinds are dissymmetric. In the markets, herding and momentum effect in short run and reversal effect in long run are obvious.When measuring the noise, we introduce the direct methods, which include bid-ask spread and behavior asset pricing model, and indirect methods, which include Jensen's a, R-S model and Variance-Ratio model. And we also make amendment about the traditional variance-ratio mode, and build up AVR model and its corresponding examining method.By use of the computed noise index from R-S model and AVR model, we analyze and examine the volume and the impact of some variables to the noise of different holding periods, through dynamic panel-data model and system GMM estimation method. We find the explanation from the variables representing the foundation of the firms to the noise is weak and decreasing with the time going, the explanation from the macroeconomic variables is better and obvious in the long run, and the investors' emotion and the information asymmetry have the strongest explanation to the noise and also obvious in the long run.Finally, according to the conclusion of this paper, we bring forward some suggestion to those who are in charge of the operation of the China stock market to guarantee the healthy growth of the market.