The Empirical And Analysis Study On Over-reaction Of Shanghai Stock Market

Traditional financial theory suggests that the price of financial products has already contains all the information,so it could be regarded as the true value of the investment price at any time.But lots of experimental studies indicated that the abnormal phenomena in the stock market could not be explained by the traditional financial theory,and overreaction became the research hotspot, emerging many theoretical and empirical results.This text is based on domestic and foreign research results, use the research methods of Debont and Thaler, select the trading data from January 2006 to June 2010 in the Shanghai stock market.Test whether there is overreaction in the stock market. The empirical result shows that the test of the loser portfolio excess return more than the winner portfolio, confirms there is exist over-reaction, and with the term longer, income is less. The study found that the portfolio risk of winner and loser could not explained well for overreaction, and cognitive biases of investors and the institutional background of China's stock market conditions and other constraints is the main reason which caused by the Chinese stock market overreaction.This paper has divided five part:(1)The study backgroung. It explains the necessity of the research in over reaction and proposed methods;and reviewed the behavioral finance background, development history, and described the basic content of behavioral finance.(2)Literature reviewed. Recalling the large number of scholars from domestic and abroad for overreaction and analysis of empirical research.(3)The overreaction of empirical ananlysis. Select transaction data from January 2006 to June 2010 in Shanghai stock, and use the classic research methods of Debont and Thaler, test the existence of overreaction on the empirical. The empirical results shows that the results of the Shanghai stock market does exist overreaction,in other words the formation of the best performing stock on the test performance was weaker than that of the average market level, the worst in the formation of the stock to outperform in the test market level.(4)The explain of the overreaction.Foreign behavioral financial research shows that it is because of the securities investors own cognitive bias and risk factors. However, if only research psychological causes and risk factors, couled not fully explain China's stock market overreaction, it should also be bound to consider the specific conditions of China's stock market, institutional background and market structure.(5) Summarizes the full text of the conclusions, and propose the investment strategy.