The stock market bubble formation mechanism I

2001 Spring Festival, China's stock market played a struggle between Chu and Han Zheng of the movement, the Voice of Iron Horse Gold Ge, heard. On the one hand, is a management purge of the stock market, and strengthen supervision of a really dynamic grid. On the other hand, economists in Shishifeifei the stock market to carry out the debate, the needle into wheat, a matter of opinion, expression and the stock market in the future development of different views. Several media have found my calling to talk about. But I would like to debate the stock market involves many fundamental issues, instead of hastily-made comments Capriccio, it is better to focus efforts on the controversy do solid research, for which an interview with Wan Xie, a closed-door February, as the draft-wu, On the square home.

Stock price fluctuations in the stock market has always been determined by market supply and demand in balance of power changes, economists on the stock market bubble of the theory argue that the reason the stock market will be the extraordinary attention because people think that will affect the policy debate theory, which The stock market will affect the supply and demand and price fluctuations. However, from a theoretical study, not because of social concern, and some remain in the image of the metaphor of the controversy, is also necessary to leave the debate on what type of impact on the share price Reflection material gain, the stock market bubble from the deep excavation of what is produced? Its formation and operation of a mechanism and what kind of characteristics? China's stock market is different from conventional stock market run of price distortions and how a bubble? Only those with fundamental knowledge and understanding of the issues before the debate sparked by the theory of exploration to a new level.

I, on the stock market "bubble" of the debate

China's stock market rise of 10 years, during which stock prices soared, so have some people rich overnight; and stock prices plummeted, making some people Zhejichensha, by the rich become poor. In the face of the stock market's ups and downs, ups and downs take-off and landing, economic theorists talking about the issue, the share price up as a hurricane in the stock market irregularities, the stock market "bubble" warned the hope that stock prices to return to its intrinsic value, such Voices heard over the past 10 years. Moreover, such a discussion, not only can be found in China, economic theory in the international community has from time to time. They believe commodity prices to its intrinsic value-based, rational actors would not "bubble", which was originally from Ricardo since the classical and new classical economics major proposition (and Marxist economics thesis). In analyzing the stock price, have noted that the stock trading of securities and commodities trading is different from ordinary commodities are the results of the work, its value comes from the production of goods into the workforce, including physical and chemical work and shift work of living The curing. As a result, the value depends on the size of the "production of the commodity cost of socially necessary labor time." Securities law is based on the issue of ownership of the property on behalf of the proceeds of the right to a legal certificate, the portfolio itself is not valuable, rather than the real capital, but the virtual capital. Investors use the money to buy securities, the right to use the money to the (securities) available for sale to investors holding the securities only to prove there is a certain amount of assets or capital value of his all, the vouchers can be regular (or irregular ) To obtain a certain income, and may sell the securities back into the securities a certain amount of money. Although the securities belonging to the virtual capital, is not in itself valuable, but it represents a certain number of realities on tenure of capital can be used to the sale, which has a value of the exchange. Moreover, it represents the share of the capital gains part of the reality of ownership, so their value depends not only on the exchange that it represents this part of the reality of the size of the capital, but also with the reality of this part of the capital's earning power, the reality is Capital gains and the ability of the two combined.

It also should be pointed out that the sale of shares of such virtual capital of the sale of its profitability, not just to buy now, but more importantly for the future purchase expectations. The size of the investment value, it depends on the investors brought about by the expected return of high and low, the securities to investors, the higher the expected return, the greater the value of their investment, while the smaller value. According to the pricing of capital income of the basic principles of any assets of the "real" or "intrinsic" value of the assets or the owner of the assets held by investors during the resumption of the best cash flow. As the cash flows of the assets belonging to investors in the coming period to hold a performance expectations, they must be discounted back to present value to reflect the time value of money. According to this theory, investment in securities is subject to two factors; First, the high and low discount rate; Second, the investment securities is expected to return.

Economists believe the stock has its intrinsic value, the value of the stock of the following three factors: stock returns (dividend); in the period at the end of the final value of the shares; for the return in the future be converted into the present value of the Discount Rate. It is in this "capital gains" under the guidance of the concept, come to a number of classic stock valuation model. As a result, and some economists believe that the sale of stock and commodity trading, the rational expectations will not happen under conditions of the "bubble." Analysis of their arguments: (1) from investors seeking to conduct inspection. Stock holders will receive a return to pricing, the assumption that the economy in the final period for the transaction T, then T-1 in the main economies will not be higher than in the period T discount the value of the stock proceeds to buy the stock price, because If he does so will suffer losses. 13 T in the bubble can not exist, similar to that after the passage of the push to send (backwardinduction) bubble can not be obtained throughout the period of any point in time there is. (2) a period of rising stock prices may make investors heart, but taking into account the economy and society, wealth is limited, so there are always a point in time in order to support the bubble must be the actual price of the shares will be More than the total economic wealth, which is no doubt at all times, is bound to burst the bubble, which at that point in time prior to the point, none of the dealers are willing to buy stocks again after the passage of the bubble impossible to determine recurrence. (3) participate in share trading transactions in the end the number is limited, although there may be high-risk high return to compensate for the temptation, but as long as one has a "risk-aversion," the participants, it will have a knock-on effects. This makes the "game" does not go on, which limited the number of transactions under the conditions after the analysis of the recurrence was also reached "bubble" will not be the judge. It is clear that such analysis is a prerequisite for stock market investors from the rational investors, when the stock market on the part of investors and even the most irrational, appeared on the share price bubble and when the Bielun.

Second, the stock market is not fully in the information asymmetry so that the irrationality of the main produce a large number of

The stock market as investors are rational investors, with an effective capital market theory linked to assumptions. Will the assumption that an effective capital market theory applies to the stock market, you can get to this conclusion: in an efficient stock market, share prices of the curve on any point of the prices of most real and most accurate reflection of the stock when the issuer in The point of all of the information. It can be inferred if the stock market to be effective, any transactions in the stock market, the actual issue price should fully reflect the value of the shares, while the value of all investors through the stock issuer All information obtained judgments. The so-called "effective" is to raise the price information to reflect the high efficiency, high-efficiency not only raise the price to reflect the speed of information, that is, in a timely manner, but also information on the prices reflect the adequacy and accuracy.

For the effective marketing in the real world can be established, we still need 4 conditions. The first is the effectiveness of public information. That is, each about a stock can have all the information fully, the real, in a timely manner in the market to be open. The second is to receive information from the public's effectiveness. That is, the above-mentioned information can be fully open, accurate and timely attention of the investors acquired the stock. Information is the third recipient of the information to make consistent and reasonable, in a timely manner to determine the value. The fourth recipient of the information is based on the implementation of the investment to determine its validity, that is the concern of every investor's shares in accordance with the judge, to make accurate and timely action. If the stock market issue with the 4 conditions, then, whether the issuer or investors, the value of the shares issued are the same understanding as a result, the market is recognized by both buyers and sellers price. Once the stock market have met all the conditions for 4, then no one can get from stock price gains, corporate profits can only be obtained from the proceeds. Moreover, regardless of what kind of investors to invest in stocks, the investment rate of return will be the same.

However, more than 4 conditions for the implementation of the various constraints they have hard cash, as follows: First: the effectiveness of public information. This is an issue mainly of those subjective terms. First, as the shares issued, will not do so, because his purpose is to issue his investors to buy shares, investors will try to promote their businesses and even exaggerate the merits of the stock, and its existence Has evaded the issue is to distort the cover. Second, some of the companies concerned may have information favorable to their competitors, can not be made public or not fully open. Third, the disclosure of information will have a certain cost as much as possible to reduce the cost of disclosure of psychological enterprise is not willing to make that information public in a timely manner. Due to these three reasons, the information made public by the effectiveness of a certain degree of restriction. The second: to receive information from the public's effectiveness. The objective conditions are subject to various factors, as a result of the disclosure procedures, information dissemination methods, technical means, such as a series of objective conditions that would have been a public information can not be fully and promptly received by investors, the dissemination of information And receiving the effectiveness of a certain degree of restriction. The third condition: investors judge the validity of the information. As the living environment for investors, different social backgrounds, different forms of values. At the same time, as investors accepted the level of education, investing in stocks of professional knowledge, so that investors have the ability to judge the information will be different. Due to these reasons, different investors the same information will make different judgments, so information judging the validity of a certain extent. The fourth condition: the implementation of investors in investment decision-making effectiveness. The main conditions for investment by investors in the implementation of the decision-making process of various objective factors. As the investors to trade the location, method of operation of the implementation of the transaction and operating conditions, the completion of the transaction technology, investors and the implementation of the investment decision-making more difficult the varied and thus affect the effectiveness of the implementation of the investment decision-making.

All of the above information in the stock market constraints, is the only listed company. In real life, factors that affect the stock price very much, the stock market uncertainty existing in very much, both good and bad performance of listed companies and stock buyers to sell the balance of power inherent uncertainty, there is a macro - Macro-economic trends and policies and activities of the external uncertainties, regulatory authorities have listed shares on the progress of the size and arrangement, as well as issues left over by history to deal with the random uncertainty of regulation. That is very much uncertainty, the stock market operator will need to give rise to a wide range of price fluctuations, and thus the stock market price movements and changes in stock prices to make their own predictions, and operate accordingly.

Information for participants in the stock market is important information to have a statute of limitations. Early access to good information, can leave in time to mobilize funds to buy low-priced stocks, access to information behind the share price will only have to follow the trend of chasing after the restart, information obtained as early as late profit-making in both the size of the differences between ; And be able to receive bad news early, as soon as possible to sell to avoid losses, as access to information behind those who can only resort open or firmly trap. Stock market participants have mastered the information in order to Xinmingyanliang, and little wonder.

Gave rise to a significant stock price volatility in both countries in the world, the differences between the status of information available, large institutions are taking advantage of their status of speculation, the Chinese were very prominent individual investors, the middle class, large; in the main body of information available on the Status On the considerable difference in their sources of information between the breadth, depth, there are different, access to information in the time series there as early as the late hours. Access to information on the great differences so that small investors like "a blind man riding a blind horse," only with the "wind", the price depends on the pressure to pull down the main body of the operation. But the agency can not force any pressure to boost share price, but in the use of its information on the status of the advantages of the information as speculation subjects, with enhanced efforts oscillation frequency. In this way, master the information on the status of inequality, inadequate disclosure of the information channels are not clear, the big institutions to create sufficient room for speculation. The so-called Long deceive subject of speculation, the speculation is not public information at the time of the formation of hazy uncertainty. Some of them early access to information to the profit, while others are making a false information to the profit-making. That is why the theory of efficient capital markets hypothesis, in real life does not exist, it is often expressed as a half-strong efficient market, the weak-form efficiency market as well as null and void. Due to the asymmetry of information, lack of information investors can not be based on the information to engage in stock transactions rational decision-making, so irrational investment in the stock market has become the group's main activities.

Third, the stock market and the irrational price of normal and abnormal bursting bubble

The stock market and commodity markets have the same side, changes in the prices of all its intrinsic value-based, but they have different side of commodity buyers in the market to buy goods to the consumer, there is no profit motive. Buyer of the stock market to buy shares in order to profit. Can profit from a stock dividend payable, Real-Time shares in the form of gifts made in the investment income, or from stock price increases in the price of access to speculation proceeds. If the stock market participants are former without the latter kind of person who does the stock price to its intrinsic value and will not return to a "bubble." But in real life, after a considerable proportion of the people, chasing stocks to buy and sell price, the stock market become a "game" an important aspect, however, the stock market's pursuit of the interests of the participants in the spread of information is inadequate, acts of non - Rational, then, the stock price "bubble" will naturally have had.

"Bubble" (bubble) in economics, the term used to describe this is an economic phenomenon, that is, in a continuous process, one or more of a sharp rise in asset prices, the price of the initial rise in prices create Will be expected to rise further in order to attract new buyers (investors), they are trading assets, the aim is to profit through trade and not want to use it. Therefore, in accordance with the definition of economics, the "bubble" is not in the investment generated, but in the pursuit of price speculation in the interests of the produce, and as a result of the capital market in stocks, bonds, futures, foreign exchange, such as the frequency of price changes, from time to time will be Changes in the prices of appear to form a bid and offer price differences, the speculative "bubble" took place mainly in the capital markets. As for the commodity markets have been in the mid-80s there were Changchun and Shenyang Clivia speculative frenzy, there is speculation calling cards, antique artifacts speculation, speculation Yixing tea sets and so on, this time appear irrational because the economy is the main commodity is not for sale Consumer use, but in order to re-sell when price changes in the interests of the post. In those years when inflation was well-known as the hoarding, it is not the same in order to meet the consumer but in order to obtain the interests of the post. This time though the sale occurred in the commodity markets, but not the role of commodity markets. Therefore, in discussing the "bubble", took place in the commodity markets, "Clivia bubble" as an exception, special attention to the capital market in the stock market in particular in the economic behavior of the main features should be allowed.

Classical and neo-classical economics that the "bubble" is not normal, the market is the main economic activities are the main rational, as a prerequisite for the assumption. But in real life, participants in the stock market is not merely strike a bonus dividend, and other investment interests of the investors, most of them eager to buy the stock price has been rising price of the interests of the main economic actors Speculative, together with their activities with the irrational nature of the weak-form efficiency as well as null and void in the market. Irrational behavior of the main account for the vast proportion of investor psychology (that is, the stock market generally speaking, the popularity) for the price of the stock market plays a significant change.

In that case, the investor psychology and how this activity? Investors buy or sell shares based on future stock price movements are expected. Originally, the future stock price movements based on the inherent stake in the company's future earnings and based on the payment of dividends and bonus, but in the future development of the great uncertainties, such uncertainties, including macroeconomic aspects of the Budget . Trade, exchange rate changes. Price level; also include micro enterprises earnings, to start new projects, distribution and so on, there are special uncertainties of the business such as M & A, and so on. But investors have access to the uncertainty of these changes is very limited, and investors are asymmetric, this time, the lack of sources of information are the main investors by observing other people's conduct in order to get information that other people Buy some stocks may be good information in his favor, and it will follow to buy, sell some shares of others may have been his stock price will fall, and it will follow to sell. This "herd behavior" with other sheep have had a go "herding." As Keynes said: "The proceeds of conventions in this market, but a group of innocent people without knowledge of the psychological product of the will of the Italian group as a result of severe ups and downs and fusion." (1997 Key Cairns (1936)〕) at this point in time, the stock market The stock market is the result of the psychological interaction, it is not based on the intrinsic value of the stock. As for how the interaction of market participants, Cairns ([1997 (1936)〕) "beauty contest game" has been described, he said: "The newspaper published 100 photos, selected participants to one of the most beautiful of the six , Who is the choice to participate in the entire contest and the results were similar to the average preferences, and will likely winners in this case, every race who do not participate in the election that he's the most beautiful of the six, while others believe that the election of the most beautiful 6. Each of the participants are from the same point of view, so they think they are not chosen the most beautiful, most people do not really think that elections are the most beautiful, but the use of intelligence, most people believe that the most beautiful person. " 'The application of this rule To the stock market, then market participants in the performance of non-existent "conspiracy", the market participants to speculate demand for equities, we must first determine that the other participants, but other participants are also to judge They depend on other participants to speculate the judge. In this way, any market participants to judge the result of the act will be determined by market participants to speculate the other to form the link in the chain, which markets a small incident caused by the psychological impact, enlarge the market for all of the impact of Factor. This will form with the oscillation frequency, so that the resonance become an important source of volatility. The stock market in the irrational, this is by the "herding effect" caused by "beauty contest game," characterized by "noise stock" performance.

People generally believe that the stock market in the irrational behavior of the stock market because of too many small investors who lack their own discretion, can only follow the trend of the operation has become a flock of sheep. However, the study made people realize that the pursuit of rational self-interest to maximize the (rational individual or collective rationality). The most typical fund manager is prone to herding. And Alan Gordon (Allen & Corton 1993) under the conditions of asymmetric information in the analysis of individual fund managers a rational strategy may result in a bubble. Managers did not own invest wealth, is operated by public funds, if the fund is for earnings, the manager of the proceeds to buy a similar arrangement options, but also proved to be an optimal principal-agent contract. However, this contract under conditions of asymmetric information is vulnerable to the risk of lead managers preferences. Pursuit of speculative profits rise to speculative bubbles. They have a herding tendency. When the share price has gained momentum, they prefer to follow the trend of building the wind or perhaps knows very well that the market bubble, the bubble will burst know, but it was not clear whether the pre-bubble burst in the final recipient, often finds that there is follow-up, they Will take risks. In China, the securities regulatory authorities to allow securities investment fund managers extract higher performance pay, as long as the fund dividend rate higher than bank interest rates of 20% over the same period, according to fund managers could be higher than the percentage point, depending on the fund's net assets 5% of the extraction Reward performance. Under the terms of the performance pay such high remuneration, which for the consequences of the stock market, is self-evident. Behavior manager with a foreign economist described the fund managers act like most, to share the royalty money, money paid by the fund holders to bear. This makes some managers are often highly risky sexual behavior, irrational behavior at this time is in line with rational, irrational behavior and thus is not limited to individual investors, it also includes being promoted as a force for stability in the stock market's Fund, which Made in the stock market's irrational increase the weight of the participants in the stock market "bubble" to increase the frequency.

There are the norm and bubbles bursting of the bubble to distinguish between abnormal, I have not used foam to drink beer with no taste to describe the normal active stock market bubble is necessary. As for the great state bubble is referring to the financial system as well as the risk of adding fuel to the flames of fanaticism market. This bubble is different from another bubble, the bubble can not be both general to invariably negative, but as far as possible to prevent the heat bubble normality so hot and then turned into a great state bubble. China's stock market is retail-oriented stocks, small investors in the stock market is characterized by low and dare not buy, wait until the stock market to heat up by the optimism and chasing to buy disposable, that the rising stock price can go up. It is normal in such a bubble next to a very emotional state into the foam, getting too much, the easier the greater the bubble burst, when the bubble burst in the stock price plummeted, often a large number of those who hold-up.

Fourth, the price-earnings ratio measures the bubble

The stock market is not a perfect market effective, rational and non-participants in the stock market is inevitable, and stock "bubble" is a recurring. But not every "bubble" are not desirable. In the stock market to price fluctuations, so that the interests of the participants was the difference, a little bit normal at this time "bubble" do not make a fuss. However, the stock market there is-a "bubble" and "bubble" markets as a result of fanaticism and the harder it is, will be shattered at any time and will trigger a systemic financial risks. For the bubble to make a distinction between the two is to try to prevent the re-hot heat, so normal "bubble" is turned into a state "bubble."

However, the "bubble" and how determined, how it is in a stage of normal or abnormal this stage? Is a commonly used earnings per share and stock price relative earnings ratio than the method, the foreign-earnings ratio of the stock market as a frame of reference. Before 1993, the New York Stock Exchange's average price-earnings ratio is 16 times the Nasdaq is 18 times. Now the U.S. stock market reached a new stage, new theories need to be explained. However, in addition to Internet stocks, high-tech stocks, shares of computer in a 40-fold to about 50, biotechnology stocks in the 22 or so times, the traditional industries did not share more than 16 times. Hong Kong stock market at 20 times earnings ratio is usually below the Asian financial blasting winds, once in the following 10 times. Hong Kong-listed H shares of state-owned enterprises is currently 10 times in the following general, however, China's Shenzhen and Shanghai stock market in December 2000 when the general market price-earnings ratio of 60 times, and some 100 times, and even thousands of times. It is clear that the reference system used method of comparison, China's share prices are high, the bubble has been the norm in the state is to transform the bubble. However, the opposite view of economists do not agree with earnings of Comparative Law, the Chinese stock that has its own national conditions and characteristics of each of the still, it is difficult to reach a consensus.

It is said that the stock market listed companies in the Annual Report is a profit figure, and then to this year's daily transactions per month with the stock price-earnings ratio calculation, and speculation in the stock market's expectations for the future. This from the past, present and future force consisting of three dynamic nature of the earnings. If the listed company's annual profit by more than doubled last year, had 60 times the earnings will be reduced to a 30-fold in the future will be even better if the original 60 times earnings will be reduced to 15. As a result, the value of investment in order to study the growth of enterprises will not tolerate a bubble of high-earnings ratio, because profit growth will increase so that the bubble be filled lay a solid foundation. However, from the actual situation of China's stock market, listed companies widespread attention not only re-financing post-financing funds to use in market access to a substantial amount of business profits after the market was unable to get its financial capital increase The new profit growth point, there is a trend of decreasing profits. As a result, past, present and future of dynamic change and the future can only be expected to-earnings ratio that is a dynamic concept, our country 60 times earnings ratio is high or low the debate, still caught in public that the public will be justified, Po said that both the rational pattern of scrimmage.

Calculating earnings ratio is a common practice worldwide, but the negative earnings as of the evaluation criteria are many people at home and abroad. In the money-burning will not only make money when the hot Internet stocks, the high-earnings ratio, with attention to the economic theory of economic eye to give tolerance, which seems to be able to change the business to make money criterion is that the And Wu were awarded the same theory. In recent years, Western economists use mathematical methods in economics and the idea of combining a variety of design models, stock price changes that exist in a bubble and the bubble's positive test. Some people still believe that the stock price is very easy to passive, can not simply use the shares of listed companies of profits and dividends distribution to explain the changes (see the West, 1988) As a result, it has become redundant modeling.

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