Research On China’s Stock Market Speculation And Stock Price Synchronicity

Fluctuation synchronicity of stock price refers to the "rising and falling at the same time" phenomenon which is said in China. This phenomenon means that the company’s stock price changing contains little firm-specific information and stock price fluctuations are more caused by market level risk. When stock price synchronicity is serious, firm-specific information will be less concluded into investor asset pricing. As for investors, reference value of company information is low. Therefore, the emergence of this phenomenon has weakened screening, selecting and feedback function of company value which is imposed by stock price, destroyed the company signal transmission mechanism, and weakened the efficiency of security market resource allocation with price. Morck (2000) and others put forward the synchronization phenomenon of stock price fluctuation firstly. Through statistics, it is found that fluctuation synchronicity of stock price in emerging capital markets is more severe than that in mature capital markets. Difference is explained from the perspective of property right economics, and it is considered that investor protection level can explain the size of the stock price fluctuation synchronization.25weeks’stock closing price in2011of Shanghai A-share is analyzed with stock price fluctuation synchronicity frequency method. It is found that there are more than60%of the stock prices fluctuate in the same direction, which means that serious stock price fluctuation synchronicity still exists in China stock market. As the main behavior body in stock market, investors’behavior have a very important influence on the stock price, and investors’speculation behavior in the stock market as a ubiquitous phenomenon in the emerging capital market are more rampant, while speculation transaction will increase the difficulty of firm-specific information acquisition and arbitrage risk. So hypothesis which severe stock market speculation is a very important reason of severe stock price fluctuation synchronization is raised.Taking631listed companies of China’s A-share market from2006to2011as samples, selecting turnover rate and p/e ratio as the proxy variable of speculative stock market, with R2as the stock price fluctuations measuring method, relationship between stock market speculation and stock price fluctuation synchronicity is studied with panel data regression methodEmpirical model results show that alter controlling the listed company’s scale, book value ratio, financial leverage ratio, industry virtual variables and annual virtual variables, turnover rate volatility and P/E ratio, as2proxy variable, are significantly related in positive correlation, while the relationship also passed the robustness lest. This empirical study conclusion shows high speculation in Chinese stock market is indeed the reason for high stock price synchronicity. Reason of severe stock market speculation is that investors’ structure in China’s stock market is mainly formed by individual investors and insufficient institutional investors. Therefore, to improve the low efficiency of stock market price, the government should support and foster institutional investor vigorously,and improve the of stock market investor protection system,while piblicizing correct investment concept and common senseIn addition,the results of this study support the core viewpoint of noise traders in behavior financial theory existing over a long period of time,and provide the empirical evidence and draw important conclusions for noise trader model,which is that trading activity of noise traders can cause fluctutions in stock price deviating from the value of the company.Meanwhile this study provides valuable theory basis for solving the problem of high stock price fluetution synchronicity in China’s stock market.