The Research On The Relationship Between Noise Trading And Earning Rates In China’s Stock Market

Accompanying with the development of our market-oriented economy, finance, as the corner of the modern economy, will act as a more and more important role in promoting the development of economy. The stock market, as the main place for direct financing of companies and where citizens used to increase their wealth, it will never be too emphasized. Doing some researches on the relationship between noises trading and earning rates, exploring the market discipline, will be of great importance in maintaining the healthy development of the market.This thesis firstly elaborates the relative economics theories about the relationship between noise trading and earning rates, which mainly contains behavioral theories of qualitative analysis, mixture distribution hypothesizes of price-volume analysis, the behavioral finance describes the origin of the noises trading well and reasons of limited arbitrage of the investors. And the mixture distribution theory, on the other hand, explains relationships between the noises trading and earning rates.The following part will discuss the relationship between noise trading and return rate mathematically. The paper constructs a limited arbitrage model including a parameter on noise trading, in the hypothesis of this model, according to DSSW and BAPM model, I sets up the noise in the market quantitatively and creatively, in this discussion, it is found that due to the risk-adversity of the participants and increasing stock risk resulting from noise trading, there exists a premium in the stock market. Further, it is proved that the existing of arbitrators in the market will make the price regress to its valid level, but not absolutely, so the information traders can just use a limited arbitrage. At last, I find the positive relationship between the noises trading and earning using the iteration method.In the empirical analysis part of this paper, after analyzing the statistical characteristics of expected trading volume, constructing a three variables(detrend volume, return volatility and return rate) VAR model, we use the residual error of actual trading and expected liquidity trading to measure noise trading. Then it discovers the positive relationship between the noises trading and earning using regression methods, at last when discussing the sample data with several intervals, the relationship will not be so significant, the reason, maybe is that the rule of limit-up and limit down policy will restrict the arbitrage behaviors. At the end of this paper, according to the conclusion of the above discussions, it points out policies about how to develop our stock market.