Empirical Research. Heterogeneous Beliefs Impact On China's Stock Returns

The financial market visions, such as IPO mystery, momentum effect, earnings momentum, and so on, could not be perfectly explained by the classical asset pricing theory based on assumption that investors have homogeneous beliefs. So they have been researched and made significant progress, based on the assumption of heterogeneous beliefs and short sale restrictions. It was concluded that the stock would drop after being overvalued, as time went on and information transfered.In this paper, the characteristics of heterogeneous belief proxy indicators were firstly analyzed in view of the findings at home and abroad. Then the additional adjustment on account of China stock turnover was selected as the proxy indicator, and the effects on China stock returns were studied on assumption of the short sale restrictions. It was found out that the stock returns changed with the investors' beliefs, on account of the quarterly, monthly, and weekly earnings. The stock returns were higher in the time windows of annual and semiannual reports, and weekend information release, but decreasing over time, corresponding with the Miller's theory which presented the effects of heterogeneous beliefs on stock price. The stock price decreased to the true value with the weakening of information impact. Finally, effective policy recommendations were proposed as follows: improving the stock market information disclosure system, building the high-quality and multi-level capital market system, and developing the investors' philosophy on value.