The Research On The Chinese Stock Market Bubble

With the reform of the financial system and the expansion of the stock market, there have been accumulated quite a lot of bubbles in the Chinese stock market. Southeast Asia economy, including Thailand, Malaysia, Indonesia and Korea Republic, had been severely hit because the bubbles formed and breaked. The stock market bubbles have very important effect on the regular operation of a national economy. If once the bubbles break in a single day, it will surely lead to the grave financial risks and economy decline .The study of the stock market theory, finding the cause of formation of the stock market bubbles and the suggestions of defending and eliminating the bubbles have great significance to the development of Chinese stock market and economy as well. In this article the author introduces the conception and the type of the bubbles, analyzes some familiar methods of judging the stock market bubbles on the basis of the facts of Chinese stock markets. The article includes five parts researching the problem of the stock market bubbles from different angles.Chapter one and two introduce the definition of the bubbles , classify the stock market bubbles and analyze the mechanism of formation. The author elaborates on the methods of Price-Earning Ratio, Tobin Q Ratio, relative growing of stock market and two referential targets, which are frequently used in measuring the stock market bubbles.Chapter three measures the degree of the Chinese stock market bubbles between the year 1999 and 2007 with the methods of Price-Earning Ratio, Tobin Q Ratio, relative growing of stock market and two referential targets, which all lead to the same result that the Chinese stock market is full of bubbles in 2007.Chapter four and five discuss the cause of our country stock market bubbles in 2007 and describe the great effects resulted from the bubbles breaking to the Chinese economy. Finally, the author submits some feasible suggestions and countermeasures according to the characteristics and causes of the stock market bubbles in 2007.