Chinese Investors' Overconfidence And Stock Pricing Under The Mechanism Of Margin Purchase And Short Sale

As the policies of margin trading and short selling continuously introduced,stocks expansion and refinancing launched.Margin trading has been growing and improving,changing the microstructure and pricing mechanism of China's stock market.It promotes the market quality,reduces the volatility of stocks and improves the efficiency of asset pricing.However,It had performed a turmoil in public stock markets in 2015.Then we can't help but ask,why the stock market still has such a big irrational rise and fall under the mechanism of short selling? Whether the Margin Trading and Short Selling has the role of increasing the volatility of the stock market,is this mechanism a masked killer or a white knight? With the booming of behavioral finance,more and more scholars believe that the investors' overconfidence plays a crucial role in the irrational market,Small and medium investors made overconfidence becomes one of the serious factors in Chinese stock market.At this point,how should we look at the role of investors' overconfidence in the irrational stock market?Therefore,based on the background of margin trading and short selling,starting from the perspective of behavioral finance,this paper analyzes the three relationships between overconfidence and stock pricing volatility,stock pricing validity,correlation of stock pricing volatility by using mathematical derivation,the results show that the investors' overconfidence will reduce quality of pricing,increase volatility of pricing.Secondly,we use error correction model to prove Chinese investors are overconfident;Then,we grouped the samples according to the institutional shareholding ratio,market value and market quotation,and analyzed the differences of overconfidence among investors.It is concluded that in the low institutional shareholding ratio,small market value,and the bull market,the investor overconfidence tendency is more serious.Finally,we use the panel regression model to test the influence on stock pricing about margin trading and investors' overconfidence,we find that overconfidence refrains liquidity,reduces pricing efficiency,increases volatility;The margin trading did not cause the turmoil in public stock in 2015,even it can reduce pricing volatility.Because the effect to market volatility and quality of investors' sentiment is greater than of margin trading,it caused that,even though the government continuously introduced various measures to deal with the turmoil of stock market,did not prevent the collapse of the stock market.At the end of the paper,the relevant policy suggestions and prospects are put forward.