Research On The Effect Of Principal Participants Game On Excess Fluctuation In China’s Stock Market

After20years’ development, China’s stock market whether in the amount and type of investors, orin the government to establish and improve the relevant system, have made significant progress. But,the stock market has an obvious feature of excess fluctuation with the existence of price volatility ofhigh frequency and large range. The excess fluctuation makes it difficult to play theresource-allocating function of stock market well, which causes instability of the financial system,and then impacts the real economy. The stock market asymmetric information decides the participantsgame behavior, also drives the stock price fluctuation. The excess fluctuation of stock price isdeterminated by the participants’ information game behavior. The government, institutional andindividual investors, which are the principal participants in stock market, consciously orunconsciously are involved in the operation process of the stock market information. Therefore, it is astudy of great theoretical and practical significance to research on the effect of principal participantsgame on excess fluctuation in China’s stock market and put forward relevant policy suggestions,which will ensure stock market running smoothly and regularly.This paper begins with summarizing the harmfulness of stock price excessive fluctuation andresearch fruits that are related to this thesis. Then, according to the effect on stock price of principalparticipants’ behavior and applying the method of game theory, the paper constructs three gamemodels, which include the signal game model between government and investors, the evolutionarygame model between institutional and individual investors, the trilateral game model among them. Inthis part, my focus is on the effect of principal participants game behavior on excess fluctuation instock market, in the process of realizing game equilibrium. The results indicate that, the governmentcan guide the investors’ behavior when signal game model separating equilibrium occurs, however,there are some factors to weaken the effect of the government’s macro-control in stock market, suchas policy goals, information sensitivity of participants, information cost of investors and so on. Inpractice, it is excess fluctuation of stock price that happens rather than separating equilibrium. Theevolutionary game model has the characteristic of multi-equilibrium, which means when the gameequilibrium is different, so does the stock market volatility. The trilateral game among government,institutional and individual investors, is that institutional investors play a role in passing andprocessing information between government and individual investors, which has an influence on theirinvestment behavior. What’s more, the paper raises the suggestions on enhancing the government’smacro-control in stock market, perfecting the stock market information transmission mechanism,cultivating rational institutional investors and improving the individual investors’ mechanism of study. Finally, the paper carries on the forecast to future research.