An Empirical Study On Cognitive Bias Of Overconfidence Of Chinese Stock Investors

Traditional financial theory holds that in a rational equilibrium state of the securities market,the trading volume of the market should be zero.However,from the actual situation of the securities market,it is obvious that the theory is inconsistent with the reality,and the huge volume of stock market transactions can not be explained by the traditional financial theory.Behavioral financiers believe that financial anomalies such as huge trading volume,abnormal fluctuations in stock prices and short-term momentum and long-term reversal effects of stock returns in recent years are caused by investors’overconfidence effect.From the relevant research at home and abroad,we can also know that there is a phenomenon of investors’over-confidence psychological bias in the securities market.Therefore,the study of investor overconfidence in behavioral finance is of great value both in academic research and in real life.Based on the relationship between return on investment and turnover rate of A share market in Shanghai stock exchange,this paper studies the psychological bias of investors’ overconfidence.Through studying and researching the literature about the effect of investor overconfidence at home and abroad,this paper defines investor overconfidence as the result that investors attribute the gains they get in the stock market to their superior investment judgment ability and the accuracy of obtaining private information.It is precisely because of the psychological bias of investor overconfidence that leads to overtrading in the stock market.Combining with the real life and the related theoretical research of scholars,the paper puts forward that the stock trading volume of Shanghai A-share market is too high.Therefore,based on the study and research of the theory,this paper examines the phenomenon of investors’psychological bias of overconfidence by selecting historical data of China’s Shanghai A-share market in an empirical way.In the specific empirical research process,the paper selects the VAR vector autoregression model and two important applications of the model,namely,the causal analysis and impulse response function to test the overconfidence of A stock market in Shanghai stock market.The empirical part mainly refers to Statman Meir,Thorley Steven and Vorkink Keith(2006)empirical methods,using the return and turnover index of Shanghai A-share market from January 2000 to December 2018 to analyze and study the overconfidence of the whole market.In addition,this paper divides the whole market into different stages and different feelings.At the end of the article,some pertinent suggestions are put forward according to the actual situation of China’s stock market.Based on the results of empirical tests,this paper draws the following conclusions:firstly,there exists investor overconfidence in the overall A share market of China’s stock exchange;second,by dividing the whole market into three stages of different periods,the degree of psychological bias of investors’ overconfidence will gradually weaken with the continuous improvement of market system;and third,by dividing the overall market environment into differences.In the rising market,it is found that the psychological bias of investors’overconfidence is more serious and lasts longer.