Research On The Relation Between Chinese Future Market Volatility And Investor Trading Behavior

The relation between investor trading behavior and market volatility is always the main issues in capital market research, but it is insufficiency in Chinese future market. So this dissertation deals with it. The purpose of the research is discussing the transmission mechanism between the investor trading behavior and market volatility, and the academic value is enrich the connotation of the future market research and test the behavioral finance theory, and the application value is improving the investor structure and preparing the supervisory policy, which give the advice for pricing and new products launches. The Characteristic of this dissertation is making the finance theory, mathematics, and software programming techniques to a whole research.We use moonbeams, wheat, aurum and hs300 index futures and find four contracts are stationarity, and partial contracts are auto-correlative. The commodities futures contracts are all heteroskedasticity; the volatility of revenue are asymmetric negative revenue amplify the volatility and positive revenue reduce the volatility. The lag volume, open interest, and large volume have different effect on volatility.After the study of volatility, we introduce the OLG model into future markets. We set the investor behavior model based on future contract price, which can also be extended to complete and incomplete information. We provide the equilibrium solution and give the first-order or second-order condition. The mathematical model present follow findings:the Bonds risk-free interest rate, the Investor's risk aversion coefficient, the supply of contracts conditions and the risk premium volatility all give impact on the volatility of future contract prices. The 2-period OLG model based on future market is consistent with the practical situation; the five propositions in the article summarize the whole situation.Based on the mathematical model in the future markets, this dissertation further induce seven hypotheses and give an empirical research on the two market abnormality which included momentum or reversal effect and calendar effect. First we find that Chinese future market exists momentum and reversal effect, the sufficient information investors such as institution adopt reversal trading patterns generally and the insufficient information investors such as private adopt momentum trading patterns in general. Second we find that intraday-effect, weekly-effect and month-effect are all exists in Chinese future market. Soybean, aluminum and wheat futures 'intraday-trend confirms the intraday-effect; soybean, aluminum and nature rubber futures weekly-trend confirm the weekly-trend; aluminum, nature rubber and wheat future's month-trend confirm the month-effect.This dissertation attempts to give reason from the deviation of investors' cognition and behavior, and the main explanation of the deviation is investor's overconfidence and herding behavior. The research on overconfidence finds that similar with the case in stock markets, investors underreact to public information and overreact to private information in Chinese futures market. Private information shocks may bring great volatility in the short-run, while private information shocks are weak and cannot persist, i.e., investors have overconfidence features indeed. The research on herding behavior shows certain extent herding behavior and it is obvious in decline future market. But there is little evidence of systemic herding and the market is relatively efficient.In framework under market volatility-market abnormality-investors'cognition and behavior, the dissertation gives the main conclusion. We point out that stable market come from the reduction of investors cognition and behaviordeviation.we give the Policy recommendations from the Consummate and optimization of investor structure, investor's education efforts, the planning of new future contracts. At last, we look ahead the lack of research, the front of behavior finance and future markets, the direction of further study.