An Empirical Study of China Institutional Investor's Cognitive Biases

This paper applies behavioral finance theory to analyze and test whether or not Chinese investors are prone to cognitive biases.The yields of the indices of Shanghai Stock Exchange are chosen as the subjects for testing whether or not it will influence Chinese investors' prediction on next trading day's Index.It furthers to analyze whether or not Chinese investors are prone to heuristic bias.The paper concludes that Chinese investors are inclined to remarkable heuristic bias,and it puts forward a kind of new method,namely,to use the increment of yield as the independent variable to explain the change of Bullish Sentiment Index.