Financial Economics And Stock Market Supervision: Event Study Methodology In Judicative Practice Of Securities Lawbreaking Behavior

With the development of China stock market, there are always being securities lawbreaking behaviors, such as insider trading, market manipulation, fraudulent statement. How to supervise the stock market effectively is a problem before the Securities Regulatory Commission. This paper focuses on securities law's legislation and executing and discusses ways to solve the problem.Compared other countries' law of forbidding securities lawbreaking behavior with ours, we may find that the legislation of our law is becoming self-contained, but the law's executing gets behind other countries. By researching other countries' experience, supervisors of developed stock market, such as US Securities and Exchange Commission, use the idea of Economics of Law to supervise stock market. Economics of Law is a subject to study law problems with economic theories. The most useful model of financial economics in securities supervision is the event study methodology. Event study methodology can confirm fraudulent behavior, determine disgorgement of fraudulent behaviors and calculate the amount of damages to be awarded in securities fraud cases accurately. Now US SEC uses event study method in securities enforcement commonly. By studying other countries' experience, we use the method in China's stock market supervision with empirical analysis in this paper.But, according to the situation of our securities market, there is still much to do to supervise our market effectively. This paper puts forward some suggestions, including perfecting the securities laws, strengthening the securities enforcements, developing supervising technologies and completing the supervising systems.