Heterogeneous Beliefs For Stock Prices Under Short-sale Constraints In China

The stock market is an important part of the financial market, its healthy development has an important impact on China’s economic trends. However, due to the direct participation of individual investors ratio of China is higher than the developed countries,the large diversity of investors result in the deepening of heterogeneous beliefs. This is likely to cause fluctuations in the stock market, harm securities market’s trade order,increase the systemic risk of the financial system, distort capital allocation function of the stock market, and harm China’s stock market in the long term. Thus the study of heterogeneous beliefs is necessary.This article uses the statistical analysis, portfolio analysis and cross-sectional regression analysis to study the relationship between stock price and heterogeneous beliefs.Firstly, study some domestic and foreign relevant documents. Secondly, consider the factors that form the investors heterogeneous beliefs and put forward assumptions about it, then derive a equilibrium model about risk asset prices based on heterogeneous beliefs. Next,select suitable indicators and division intervals according to the characteristics of investor and short-sale constraints, do empirical analysis about the relationship between heterogeneous beliefs and the stock price using portfolio analysis and multiple regression analysis. Finally, propose improvement measures in order to reduce the stock market volatility, exert the function of resource allocation better.The study found that:(1) heterogeneous beliefs exist in China’s stock market;(2)structural differences have a significant impact on investor heterogeneous beliefs. With the improvement in investor structure, the impact of heterogeneous beliefs has decreased;(3)heterogeneous beliefs affect stock prices in different directions, division intervals are necessary;(4)The establishment of short sales mechanism does not reduce the price volatility as we expected but enlarge it. It shows that China’s short sales mechanism has more room to improve.