SIR Model And Its Application In Investor Behavior Research

The research of investor behavior has become a very compelling field in finan-cial research.It profoundly reflects on the rational assumptions of traditional investor theory.And it begins to explain the market behavior from the per-spective of human beings in reality.Investor behavior fully considers the role of psychology in market participants*decision.It provides a new perspective for understanding financial markets.So far,the existing empirical research on investor behavior has mainly focused on the investor's emotional and psycholog-ical aspects.The research on investor herd behavior has become a new researh hotspot.In the procesa of investing in the stock market,investors are often affect-ed by the behavior of other investors.They have the behavior of mimicking other investor's decisions or relying too much on public opinion,thereby performing the same investment,behavior as other investors.Epidemics are manifested in those who are susceptible to contact with the infective.Then the same symptoms ap-pear.The process mutual infection among investors is very similar to the spread of epidemics.SIR.model is a classical mathematical model in the dynamics of epidemics,and it has been favored by the majority of scholars.Based on the growth characturis-tics of the population,the law of occurrence and transmission of diseases within the population,and the social factors,a model capable of reflecting the dynamic characteristics of epidemics was established.With qualitative and quantitative analysis,and simulations,we can obtain the course of the disease,thereby re-vealing its law of transmission,forecasting its development trend,analyzing the prevalence reasons and key factors of the disease,finding optimal strategies for its control and prevention,and providing theoretical basis and data support for prevention decisions.This article compares the spread of epidemics with the phenomenon of behav-ioral infection among investors in the Chinese stock market,and applies the SIR model to the research of investors' limited rational behavior.First,the deter-ministic and stochastic models of the SIR model are reviewed,along with the nature of the model and its application in the financial field;then,based on the behavioral cotagion effects of investors,the total amount,of funds in the stock market is divided into three categories:the wait-and-see funds that have not yet been invested in the stock market,the investment funds that have invested in the stock market,and the out of funds that have been withdrawn from the stock market.Then we establish a stock market-SIR model that studies the behavior of investors;finally,with selecting actual data,the intensity of mutual infection and the intensity of exit among investors were discussed to study the relationship between the behavioral contagion of investors and the flow of funds in the stock market.We select the total circulation market value of stocks in Shanghai and Shen-zhen from March 2007 to October 2008.First,the deterministic model and the least squares method are used to estimate the parameters.The intensity of mu-tual infection and the intensity of exit are obtained.Then using the stochastic model,we obtain the track of the three types of funds in the stock market.The probability density of investment funds at different times is acquired through multiple simulations.Finally,we discuss the influence to the circulation market value when the intensity of mutual infection and the intensity of exit changed.