The Style and Structure of Chinese Stock Market in 2005~2010: Based on Symbolic Principal Component Analysis

By applying the symbolic principal component analysis (SPCA) on the empirical data of the CITIC style indices in six years (2005-2010), we studied the characteristics of Chinese stock market from multiple perspectives. Two components are extracted from five variables--P/E ratio, NMC, turnover rate, return rate, and volatility--and are defined as the market performance factor and the size factor. Further, drawing the run track of the six stock style portfolios and combining with the zoom-star plots of symbolic data, we find that the Chinese stock market is excessive speculated and bounded rational.

I. Introduction

Since the beginning of China's stock market in 1990, it is developing at an alarming rate. The total market capitalization of Chinese mainland stock market was beyond the total GDP for the first time on August 9, 2007. As the main representative of Chinese capital market, the development of China's stock market is important for China's economic reform. There is an urgent need in an in-depth analysis of history and current situation of China's stock market development, and an exploration of the inherent regularity of the development. It is practically necessary not only for the scientific understanding in recent years, but also for decision-making of building healthier and more mature stock markets.