Critical and Analytical Learning in Finance [2]
论文作者:留学生论文论文属性:职称论文 Scholarship Papers登出时间:2010-12-02编辑:anterran点击率:6684
论文字数:2147论文编号:org201012021313214144语种:英语 English地区:中国价格:免费论文
关键词:essayEMHtraders
iah and Davidson (2007) have created a model to measure Noise Trader Risk that can be applied in different markets (generalised model) based on the ideas from DSSW (1990) and Shefrin and Statman’s (1994) Behavioural Asset Pricing Model (BAPM).
To date the existing literature has focused studying markets such as Australia and America however there is no research available on the effects of noise traders on the Chinese stock market. Chen et al. (2004) found that Chinese individual investors tend to be overconfident, inclined toward a disposition effect, and exhibit representativeness bias. This overconfidence coupled with the Chinese well known love of gambling allows us to logically infer that overreaction is most likely prevalent in the China A share market. We also believe that Information pricing error is prevalent in the B share market due to foreign investor’s lack of knowledge and familiarity with respect to Chinese equities and the companies they are investing in. Also as stated by Rawsky (2002) China’s share markets suffer from official manipulation, insider dealing, and fraudulent reporting which will in turn have an effect on the decisions made by informed traders. Many academics have however researched the volatility and inefficiencies in the Chinese stock markets. Girardin and Liu (2003) noted that “eminent observers argue that the stock market looks like a casino (Wu JingLian)” this was also noted by Lim and Brooks (2009) in their paper which re-examines the efficiency of the A- and B-shares markets in Shanghai and Shenzhen Stock Exchanges (SHSE and SZSE) using a battery of nonlinearity tests and their research suggests that investors in the Chinese stock markets trade like noise traders and simply speculate. Ng and Wu (2006) also noted that the decisions made by Chinese investors are often not influenced by stock fundamentals that are related to a firm’s financial information or future prospects, instead they are more likely ‘driven by their emotions, acting as noise traders, and hence a stock’s fundamental financial information plays no role in their trading decision”. Yin-Hua and Tsun-Siou (2000) also looked at volatility in share prices and unexpected returns caused by market inefficiencies in Chinese markets concluding that the volatility of A shares is higher than the volatility of B shares in effected providing a form of inconclusive evidence of noise traders in the Chinese equity markets.
Methodology Section
Ramiah and Davidson (2007) tested their model on the Australian Stock exchange which is an ideal testing ground due to the fact that it is accessible by institutional/sophisticated investors (information traders) as well as mum and dad investors (noise traders). We will attempt to apply this model in the Chinese stock market. The Chinese stock markets differs from the ASX as it is composed of three securities markets, the Shanghai Stock Exchange (SHSE), the Shenzhen Stock Exchange (SZSE) and the Hang Seng (Hong Kong Stock Exchange). There are also two types of shares in China, A-shares and B-shares with A shares having restricted ownership to Chinese citizens only and B shares being open to all market participants.
The IANM uses the Behavioural Asset Pricing Model (BAPM) developed by Shefrin and Statman (1994) and the Capital Asset Pricing Model (CAPM) and it attempts to capture noise trader risk. Differing from classic noise trader theory, Ramiah and Davidson (2007) do not a
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