Analysis of Abnormal Phenomena in China Securities Market Based on Behavioral Finance

Abstract

Compared with western mature markets, China securities market started late and has some obvious deficiencies, which leads to traders, especially individual investors, easy to make irrational investment decisions which cannot be explained by traditional finance. Based on the relevant facts and references, this paper believes that there are overtrade and exceptional open-style fund redemption in the fund market, dramatic fluctuation, and Irrational reaction in the stock market. The main reasons based on behavioral finance are: noise trading, herd behavior, prospect theory and disposal effect and overreaction. Finding out the typical anomalies and reasons of the two markets is conducive to study how to improve the efficiency and stability of China security market. This paper innovatively puts forward the background reasons and gives three suggestions in the conclusion: imitating trading, avoiding duplication of decision-making, and increasing the development of financial derivatives, which also has a certain reference significance for the improvement of policies and systems.