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Behavioral heterogeneity and excess stock price volatility in China

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  • Zhang, Wei
  • Zhou, Zhong-Qiang
  • Xiong, Xiong

Abstract

This paper investigates excess stock price volatility in China using a heterogeneous agents model (HAM) with fundamentalists and chartists. We use the dynamic Gordon price-dividend model to estimate the fundamental values of the CSI 300 index from April 2005 to December 2017. The value of excess stock price volatility is obtained by the deviation of the realized value from the fundamental value. After calibrating the HAM using the CSI 300 monthly data, we find that this model can significantly explain the booms and busts of the Chinese stock market in the sample period.

Suggested Citation

  • Zhang, Wei & Zhou, Zhong-Qiang & Xiong, Xiong, 2019. "Behavioral heterogeneity and excess stock price volatility in China," Finance Research Letters, Elsevier, vol. 28(C), pages 348-354.
    • Handle: RePEc:eee:finlet:v:28:y:2019:i:c:p:348-354
    DOI: 10.1016/j.frl.2018.06.004
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    References listed on IDEAS

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    1. Klaus Adam & Albert Marcet & Juan Pablo Nicolini, 2016. "Stock Market Volatility and Learning," Journal of Finance, American Finance Association, vol. 71(1), pages 33-82, February.
    2. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-436, June.
    3. Akdeniz, Levent & Salih, Aslıhan Altay & Ok, Süleyman Tuluğ, 2007. "Are stock prices too volatile to be justified by the dividend discount model?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 376(C), pages 433-444.
    4. Eli Ofek & Matthew Richardson, 2003. "DotCom Mania: The Rise and Fall of Internet Stock Prices," Journal of Finance, American Finance Association, vol. 58(3), pages 1113-1137, June.
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    Cited by:

    1. Zhong-Qiang Zhou & Jie Li & Wei Zhang & Xiong Xiong, 2022. "Government intervention model based on behavioral heterogeneity for China’s stock market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-19, December.
    2. Luo, Yi & Li, Xiaoming & Yu, Wei & Huang, Kun & Yang, Yihe & Huang, Yao, 2024. "Research on human dynamics characteristics under large-scale stock data perturbation," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).

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