Behavioral Finance and Analysis of Security Investment Behavior

Author: Li Shilin
Publisher:
Publish Date: 2005-11-01
Features: Applies behavioral finance theory, focusing on the impact of special noise trading in financial markets—positive feedback trading—on the evolution process of security prices. The study suggests that positive feedback trading in financial markets may lead to overreaction and the formation and bursting of asset pricing bubbles in the stock market. In nonlinear decision-making environments, the intrinsic positive feedback mechanism and nonlinear characteristics of security price evolution may result in chaotic processes, causing security price behavior to exhibit high complexity. The author also conducts empirical research on the predictability, overreaction, and chaotic characteristics of the Shanghai and Shenzhen stock markets in China, with the research evidence being consistent with the conclusions drawn from behavioral finance theory.