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Based on five original sentiment indicators in Hong Kong stock market, including the closed-end fund discount rate, the average first-day returns of initial public offering (IPO), the number of IPO, the market trading volume and turnover, this paper uses the principal component analysis method to calculate a comprehensive investor sentiment index. After excluding the trend and seasonal factors from the comprehensive investor sentiment index and Hong Kong Hang Seng Index by autoregressive moving average-generalized autoregressive conditional heteroskedasticity (ARMA-GARCH) family models, this paper makes correlation analysis and Granger causality test on the residuals of ARMA-GARCH model. The study shows that ARMA-GARCH models can effectively process the autocorrelation and heteroscedasticity of investor sentiment index and Hong Kong Hang Seng Index. Also, it indicates that the Hang Seng index return is the Granger cause of investor sentiment in short terms while not in long terms. That is to say investor sentiment would be more optimistic in short terms when the Hong Kong stock market goes up, and vice versa. [ABSTRACT FROM AUTHOR]

This paper establishes a decision model of optimal capital structure based on decision-makers' cognitive heterogeneity. The relationships between cognitive bias and tax effect of capital structure are empirically tested using data of 337 companies listed on Shanghai and Shenzhen stock exchange from 2000 to 2010. This paper conducts an in-depth analysis of the impact of cognitive bias on tax effect of capital structure. The research reveals that, Chinese listed companies tend to employ conservative debt policies. Decision-maker's cognitive bias can have a major impact on the relationship between corporate capital structure and tax rate. When a decision-maker doesn't involve or involves to a minimum cognitive bias in decision making, the decision-maker will increase company's debt ratio relatively to the increase in tax rate. While, when cognitive bias of the policy-maker is medium or high, the capital structure decision and tax rate are uncorrelated. The findings show that, the corporate decision-maker's heterogeneity causes the sensitivity of corporate capital structure towards tax-rate change to vary. Thus, expanding the extensions of the theories of capital structure, and understanding of the effect of cognitive bias on the tax effect of corporate capital structure has both theoretical value and practical significance. [ABSTRACT FROM AUTHOR]

Bubbles are often defined as exponentially explosive prices within traditional financial bubble models. These models are bearing criticism to be not able to effectively detect the bubbles because the exponentially growing price regime observed, which is defined as bubble, could also be rationalized by some possible fundamental valuation models. However, super-exponential growth bubble models can provide a clear distinguishing signature between bubble and fundamental growth. In this kind of models, the essence of bubble reflects the faster-than-exponential characteristics, which implies a theoretical finite termination time. This paper attempted to introduce a new super-exponential growth bubble model, which is called Stochastic Mean-Reverting Critical Times model. According to this model, detection and diagnostic of bubble were translated into i) testing existence of a stationary mean-reverting critical times series embedded in nonlinear non-stationary stock price series, ii) estimation of exponent for positive feedback effects and the potential critical time. Employing this model, the empirical study for Chinese stock market indicates that the 2005-2007 Chinese bubble can be detected; the strength as well as stability of bubbles among 29 industrial sectors be also measured. Meanwhile, this model suggests the feasibility of advance bubble warning for Chinese stock market. At the last, this paper discusses the policy implication for bubble precaution. [ABSTRACT FROM AUTHOR]

This paper constitutes the first exercise to apply linear and non-linear Granger causality tests to investigate the time-varying spillover effect between the mainland China and other global stock markets. The analysis is conducted in a comparative way by using both the Granger (1969)'s Granger causality test and the Hiemstra and Jones (1994)'s nonlinear Granger causality test. The empirical results reveal that there exists nonlinear spillover between mainland China and other global main stock markets. With the deepening of globalization and development in China's stock market, there is evidence of an increasing integration among domestic and international stock markets. Policy implication of this paper is that risk monitor system should attach great importance to the information flow from overseas stock markets. [ABSTRACT FROM AUTHOR]

In this paper, we first use a simple mathematic model to infer the role of buy-side analysts in correcting the optimistic stock recommendation and earning forecast of sell-side analysts, and then investigating the relationship between investor sentiment and optimistic stock recommendation and earning forecast in those two types of analysts. The results show that, when the market sentiment is higher, the stock recommendation and earning forecast are more optimistic for sell-side analysts, whereas the stock recommendation and earning forecast are more conservative for buy-side analysts. Further evidence confirm that the relationship between in market sentiment and stock recommendation and earning forecast are significantly different between buy-side analysts and sell-side analysts. Our findings have import implications for stock market development in China. [ABSTRACT FROM AUTHOR]

It is one debating point between traditional and behavioral financial theories why momentum effect persists in most financial markets. In view of Chinese stock markets' features, this paper constructs "relative price" momentum portfolios based on "anchoring bias" and "disposition effect" in behavioral financial theories, and explores the relationship among these new momentums and classical momentums. The results show after controlling the classical momentum effect and systematic risk factors, the relative price momentum effect still exists. However, after controlling the relative price momentum effect, the classical momentum effect disappears. If considering transaction costs, investors could not benefit from the momentum strategies. These findings indicate that "anchoring bias" and "disposition effect" are important reasons of momentum effect in Chinese stock markets' features, and high transaction costs hinder the arbitrary. [ABSTRACT FROM AUTHOR]

Basing on the theoretical model and empirical analysis, this paper provides a discussion of the hedging effectiveness between the stock market and index future market under the imperfect market conditions. In theoretical analysis, the relation of market imperfection with market microstructure noise and hedging effectiveness is established. In empirical analysis, one approach based on nonparametric estimation is established and applied to real data. The reasonableness of model assumptions and the correction of model conclusions are verified by using 5-minute frequency intra data. Both theoretical and empirical analyses show that the higher the degree of market imperfection, the more necessary to consider the impact of market microstructure noise when using stock index futures to hedge the stock market risk. The empirical results also show that there exists a high degree of imperfection between stock market and stock index future market, but the degree of imperfection has a decreasing trend. [ABSTRACT FROM AUTHOR]

This paper proposes a new panel quantile regression model with change points at unknown positions, which parameters are estimated by Bayesian inference and MCMC sampling. By an empirical study to explore structural changes in the high-frequency dependence from trading volume and market trend to IPO's initial return in China's growth enterprise market, it is found that: structural change points are near the market opening for higher quantiles of returns, and close to the median trading time for lower quantiles; the IPO's trading volume gives a greater impact on IPO's return before change points than after change points on listing date, while the volume of Shenzhen composite index contributes larger impact on IPO's return after change points than before change points; the separation of return and volume of IPOs is detected both at lower quantiles before the change points and at any quantile after the change points; the volume of Shenzhen composite index is positively correlated to IPO's return through all quantiles before or after change points, moreover, the correlation coefficients after change points are stronger than ones before change points, and the same is true at extreme quantiles than at median quantiles. [ABSTRACT FROM AUTHOR]

This paper aims to explore whether the warrants in Shanghai and Shenzhen stock exchanges are redundant securities by empirical studies. To obtain an exact analysis, an appropriate sample is selected from August, 2005 to December, 2009, which can exclude the influence of reform of non-tradable shares, dilution effect of warrants and recreation effect of warrants on the return of underlying assets. Wild bootstrap event study methods were employed to overcome the problem of too small sample size, which were performed on abnormal return, cumulative abnormal return, and standardized cumulative abnormal return to test the magnitude effect. The results demonstrate no evidence of magnitude effect after the introduction of warrants. However, the evidence of sign effect is found: the percentage of negative average cumulative abnormal return was bigger than that of the positive average cumulative abnormal return after the introduction of warrants. We claim that this phenomenon is caused by the migration of radical agents from stock market to warrants market and the warrants in Shanghai and conclude that Shenzhen stock exchanges are not redundant securities. [ABSTRACT FROM AUTHOR]

There is a dramatically increase in institutional investors ownership of Chinese stock market from 2003. In this paper, we improve the MS-GARCH model to analyze the daily returns data, and provide empirical evidence on the impact of sub-owned shares reform and institutional investors in stock market. We find that Chinese stock market transform form low volatility state to high volatility state after the sub-owned shares reform. The results also prove that different funds have vary effects on the volatility of the stock market, and the adjusting of interest rate and reserve ratio could also affect the the volatility of the stock market. According to the comparison between two models, MS-GARCH model is much better than single-regime GARCH model in goodness-of-fit and forecasting performance. [ABSTRACT FROM AUTHOR]

In this paper we employ a three-regime-switching model, to capture the nonlinear characteristics of the Chinese stock market bubble dynamics, and to test the explanatory power of heterogeneous beliefs for the regime-switching. We find that the bubbles in SHSE can be distinguished into dormant, explosive and collapsing three regimes, and the abnormal trade volume and the excessive return have the significant explanatory power of the regime switching. [ABSTRACT FROM AUTHOR]

Bank loans is the mainly channels of the external financing for corporations in China, and loan renewals policy determines whether a company can continue to access bank loans. By the data of Chinese non-financial listed companies in stock exchange market, the paper investigates the relationships between political connections, institutional environments and loan renewals. The thesis finds that political connections do have impacts on access to more preferential treats of bank loans. And political connections have impacts on bank loans in different institutional environments. We also found that the higher level of regional property right protection, the less powerful of the government intervention and the higher of the financial development, the less loan renewals the enterprises will get. [ABSTRACT FROM AUTHOR]

This paper selects the China's newly opened stock trading accounts as a proxy of investors' sentiment index, and uses the ARMA-GARCH-type models to examine the relationship between the investors' sentiment index and the stock returns. The results show that the ARMA-GARCH-type models can effectively capture the autoregressions and the heteroscedasticities of investors' sentiment index and the returns of Shanghai Stock Exchange composite index. The result from Granger Causality Test demonstrates that the factor of returns of Shanghai Stock Exchange composite index is a significant affecting element to the change rate of investors' sentiment. However, we find that the change rate of investors' sentiment has no significant Granger causality relationship. Investors may adjust their sentiment based on different characters of market performances. When the market is on the raising period, investors behave in a more optimistic mood. At the same time, more new investors enter into the stock market. By contraries, when the market is on reverse period, investors behave in a pessimistic mood. Investors will wait and see, and go slow entering into the stock market. The newly opened stock trading accounts will also be decreasing. [ABSTRACT FROM AUTHOR]

On the basis of pre-existing high-frequency time series model and the Heterogeneous Market Hypothesis, this paper constructed the HAR-BACD-V model. Through the empirical analysis to probe into whether different trading frequency investors' trade behavior may have different contribution degree to instantaneous stock market fluctuations and volume may affect trading duration, financial product yields and volatility or not. The empirical results furtherly confirmed the heterogeneity of Chinese stock market, meanwhile, different trading frequency investors' trade behavior have different contributors to stock volatility, and found trading volume also have different influence on trading duration, returns and volatility. [ABSTRACT FROM AUTHOR]

In this paper, we consider the issue of warrant pricing when the underlying asset follows the GARCH diffusion model. Firstly, we develop a method for maximum likelihood (ML) estimation of the GARCH diffusion model based on the efficient importance sampling (EIS) technique. Then, taking SSE and SZSE composite indices in Chinese stock market as an example, we apply the EIS-ML method to estimate the parameters of the GARCH diffusion model, and we find that the EIS-ML method is efficient. Finally, an empirical study of Hang Seng Index warrants is presented. Empirical results show that the GARCH diffusion warrant pricing model is more accurate than the classical Black-Scholes (B-S) model. [ABSTRACT FROM AUTHOR]