Analysis Of Speculative Earnings Probability Under Asymmetric Information

The purpose of writing this paper is mainly to solve two problems, the first is to prove theoretically the traders who have the advantage of private information are inclined to adopt 'excessive trading strategy' to conceal his real investment intention.('excessive trading strategy' means investors make their investment plan according to subjective judgment rather than objective reality) The traders who have disadvantage of private information would adopt 'mechanical following strategy'which would give them excess earnings outweighed buy-and-hold strategy. (The explanation of' mechanical following strategy' is similar to above-mentioned situation)So this paper give a new theoretical explanation to speculative behaviors which have existed in Chinese stock market for more than twenty years. The second purpose is to do filter test and multiple regression analysis based on Chinese stock market historical data. The results show 'mechanical following strategy' can acquire excess earnings outweighed buy-and-hold strategy in Chinese stock market in certain conditions,concluded trading fees. For example, if we choose the strategy determined by 10-day and 20-day SMA, the coefficient of correlation is 16.576 (t-value is 6.0034 )excluding trading fee and 13.3442 (t-value is 4.4716 ) including trading fee, which means one point jump in max/min will lead 16.576% and 13.3442% jump in the return of filter test results. At the same time, this paper also proves above-mentioned excess earnings have little relation to some fundamental financial indicators, but have positive relation to the range of historical price variation. This paper consists five parts: first part is abstract ; second part is Chinese and foreign literature interview ;third part is theoretical analysis ; forth part is empirical analysis, which consists filter test and multiple regression analysis based on Chinese stock market historical data.The data include all historical closing price since IPO, and in multiple regression analysis, we use closing price since October 30th 2009 ; fifth part is conclusion and drawback of this paper.