Research On Stock Market Bubble Of China Based On Ensemble Empirical Mode Decomposition

Rational bubble theory is built on the basis of rational expectations, and behavioral finance bubble theory finds the rationality of investors are limited, but both belong to the same linear paradigm, and both explain fluctuations in the capital market asset prices from external mechanism. Heterogeneity beliefs asset pricing theory is based on the non-linear paradigm, it interprets the way of asset price run form a view of internal operation of the market mechanism. At present, Most of Research on the relationship between heterogeneous beliefs and the stock market bubble consider part of asset pricing which is determined by heterogeneous beliefs shall be bubbles, but the answer to how heterogeneous beliefs affects the stock market bubble and Which specific bubble will be exactly brought about is not very sufficient.To test the existence of the stock market bubble, this paper decomposes the Shanghai Composite Index and Shenzhen Component Index by using the method of Ensemble Empirical Mode Decomposition(EEMD) which can accurately interpret all kinds of frequency information on the surface of the nonlinear, non-stationary signals. Referring to the current research on stock market bubble, this paper introduces macroeconomics economy period, credit, international capital flows, monetary policy and other aspects of the factors into the stock market bubble, and in the micro level investor heterogeneous beliefs which is always considered be more in line with the realistic market is introduces to investigate the formation mechanism of the stock market bubble, and also this paper propose a two-level formation mechanism in which macroeconomic factors affects the stock market bubble by the micro-level. Finally, further research on the relationship between heterogeneous beliefs and the stock market bubble has been studied.This paper finds EEMD can perfectly tests out the Shanghai and Shenzhen stock market bubbles, meanwhile, the bubble has positive and negative points, and it is the result of multiple superposition of cycles of nature oscillation modes; After signal reconstruction, IMF decomposed form EEMD contributes to make a right judgment on the stock market patterns in a short or long term. And the operation cycle and volatility have a certain significance to investors and regulators; there is a two-level formation mechanism in the progression of stock market bubble, which means, the micro-macro factors affecting the stock market bubble by the key factor: investor heterogeneous beliefs degree level; heterogeneous beliefs is an important factor which determines the substantial change of the stock market bubble patterns, and the greater the difference in the degree of investor heterogeneous beliefs, the greater the change will be.