Research On The Relationship Between Investors’ Attention To Salient Historical Returns And Stock Prices

With the continuous improvement of our country’s economic growth and residents’ income level and knowledge level,coupled with the rapid development of science and technology,the threshold for entering the stock market investment is getting lower and lower.Shareholders in China have grown rapidly.As of September2,2021,the number of investors in China has reached 189 million,and the number of new investors has repeatedly hit new highs every month.One of the characteristics of our country’s stock market has always been that the vast majority of transactions in the market are driven by individual investors(Dong Dengxin,2020),and institutional investors play a very small role in the stock market.Compared with the US stock market,which is dominated by institutional investors,China stock market is a "retail market".Most of the investors who poured into the stock market do not have professional investment knowledge and investment literacy.In life,financial news headlines are full of words such as "exploding thunder","diving","swelling","daily limit" and other words to attract readers’ attention.Will specialist investors be attracted to these unusual yields? Chasing up and down is strong evidence.The existing research results show that there are irrational investment behaviors in China stock market.By sorting out the existing results,it can be found that when domestic research on investors’ irrational behavior,they either research the phenomenon by looking for data construction indicators such as Internet search volume and stock forum posting volume;or use prospect theory to conduct research.As a representative theory of behavioral finance,prospect theory explains many phenomena that violate expected utility theory in decision-making,such as Allais paradox,risk preference reversal,etc.However,prospect theory does not give a specific value function form,so in explaining Different phenomena require different functions and constraints.In recent years,a new theory has been developed in the field of behavioral finance—the salience theory,which can make up for this deficiency of prospect theory.Like prospect theory,salience theory is also an effective tool for describing bounded rationality.Its progress lies in the use of a unified functional model to judge people’s choice results.In addition,salience theory adds the concept of reference dependence,and there is no application prospect theory.the problem of overweighting.Based on salience theory,this paper studies the impact of stock historical returns on stock prices.The analysis ideas and main contents are as follows: First,based on salience theory,construct the core salience theory variable(SA)of this empirical study,which can well reflect personal investment.referential dependence and subjective probability distortions in different states when making decisions.Secondly,the salient theoretical variable(SA)is used as a ranking variable for univariate combination analysis,and thirdly,the control variables market beta(BETA),company size(ME),book-to-market ratio(BM),momentum(MOM),short-term reversal(REV),illiquidity factor(ILLIQ),maximum daily return(MAX),minimum daily return(MIN),idiosyncratic volatility(IVOL),and prospect theory variable(TK)as sorting variables in turn to carry out a bivariate combination analyze.This method can analyze whether the salience effect is widely distributed in the sample data or concentrated in stocks with a certain class of characteristics.Then,the Fama-Mac Beth regression method is used to control all the features at the same time to further test the robustness of the conclusions of the combined analysis method.Finally,the paper considers the effect of more rational institutional investors’ shareholding ratio on salience.The main conclusions of this study are as follows: First,the difference in returns between low-and high-salience portfolios is not only economically large,but also statistically significant and cannot be explained by common risk factors.Second,the salience effect is not concentrated on stocks with certain characteristics,but widely exists in the A-share market.Third,an increase in institutional ownership can dampen the negative change in future returns brought about by the salience theory.This article has the following features.First,the research perspective is novel.Based on the development of outstanding theories in recent years and the new achievements of domestic and foreign applied research,the impact of irrational behavior of investors in my country’s capital market on the stock market is actively explored from the perspective of empirical analysis.The second is to pay attention to the choice of methods and the completeness of analysis in the empirical analysis,which technically ensures the reliability of the conclusions.In addition,this paper also provides theoretical support and factual and realistic basis for the "de-retail" of my country’s stock market.