China Securities Investment Risk Measurement Model: Behavioral Finance Perspective

Along with development and enlarge trade volume of security market,more and more capitals are invested in security market; but at the sametime the votalities of security prices are intense, so investors face greatinvestment risk. Classical finance based on rational investor and efficientmarket hypothesis builds a lot of security investment risk measurementmodels. But more and more empirical researches reveal that, investors arefar less rational than the hypothesis of classical finance, for who areaffected by lots of behavioral factors; and security market is far lessefficient than the hypothesis of classical finance, for which has a lot ofnoises and imperfect factors; so security investment risk measurementmodels based on classical finance face more and more critical fromempirical researches. The security investment risk measurement modelsbased on behavioral finance are paid more attention. But because thesecurity investment models based on behavioral finance account forbehavioral factors of investors, which make models too complex, include toomany parameters, and hard to apply.This paper based on the research of major security investment riskmeasurement models and the situation of China's security market,analyzing the psychological and behavioral factors of Chinese investors,form behavioral finance perspective, gives a definition of securityinvestment risk, and builds a security investment risk measurement model-Behavioral Probability and Expectation of Shortfall, BPES). Paperinterprets the parameters, and discusses the measurement of p and E of BPES model. Paper uses SHANG ZHENG ZONG ZHI (Shanghai SecuritiesExchange Stock Index) to exam the effectiveness of BPES model. Thedistribution of excess times and quantities, and the independence betweenexcess times and quantities show that BPES model is effective. At the end,paper gives a specific applying example of BPES model, discussing BPESmodel applying on investment risk analyzing and investmentdecision-making. Paper calculates the BPES risk value of some examplestocks of HUSHENG300 Stock Index, which proves practical effectivenessof BPES model.