Comparison, Extension And Applications In Stock Price Volatility Models Based On The Value Of The Company And The Market Behaviors

Since the stock market established in China, it has experienced several times of booms and collapses, as can be seen from the Shanghai Composite Index which hit as low to 95.79 points and struck as high to 6124.04 points. The excessive volatility of stock prices increased the investment risk of capital market, and caused a negative impact to the development of the market economy. Under the assumption of rational expectation, investors will become the expectations of company’s value and risk, on the condition of Efficient Markets Hypothesis, the stock price fluctuates around its value, the value’s change is the fundamental reason of the stock price fluctuations. Behavioral finance theory attempts to depart from the heterogeneous characteristics of investors and bounded rationality assumptions, through investors’mental activity analysis, research the change of market behavior influence on price volatility.Under the assumption of rational expectation, this article consider the impacts on share price volatility from two aspects:the value of the company and the market behavior. And consider the possibility to improve the degree of share price volatility model fitting and forecast precision in two aspects. This article starts with the expectations theory and efficient market theory, illustrating the theoretical foundation of the prediction of share price. Then through the classic company value evaluation model’s application comparison, we found that based on the multiplier value evaluation model of the market have a great advantage in the application in our country, p/e multiplier is a relatively ideal indicator in measure of the value of listed companies in China. At the same time, inspired by comparison between BSV, DHS and HS model, market behavior research in China can be divided into three aspects:degree of investor confidence, Market disagreement and investor sentiment, and selection of new accounts, the business volume and the closed-end fund discount rate as the corresponding evaluation index. After that, in order to further quantitate analysis of the value of the company and the market behavior impact on the fluctuation of stock price, market behavior error correction model has been built. Results show that in our market, a positive impact from a standard deviation of Value of the company in the long term will cause stock index logarithmic moving, while investor confidence, Market disagreement and the investor sentiment have a long-term co-integration relationship with stock index logarithmic, and they can make a large extent be explained on the stock price volatility, the investor sentiment impact on stock price fluctuations appear fast. Then, considering the existence of financial time series Heteroscedasticity and volatility clustering, we choice ARMA-GARCH model to forecast the volatility of stock, considered the value of the company and market behavior on share price volatility which has a long-term or short-term impact factors, so we try to extend the model from the company’s value and market behavior aspects in order to increase the response of model to the external factors, thus improving the degree of fitting and prediction ability of the model. Finally, on the basis of theory and empirical analysis in this article, from the value of the company and the market behavior these two aspects I put forward rationalization proposal about how to prevent the stock price from appearing excessive volatile.