Overconfidence is a typical psychological phenomenon in human cognitive bias, itcauses the investors overly trust their own analytical skills, so the market reaction is notentirely rational. In order to explore the relationship between trading volume andoverconfidence in the future market, we have done the following researches:First, the research literatures about overconfidence and trading volume are included.We find that the existed literature on overconfidence research mainly focuses on the stockmarket, and the criteria of the overconfidence have not been unified. This chapter givesthe meanings of study about the behavioral finance theory in the future market.Second, we analyze the phenomenon that basis as the difference between spot andfutures price will be abnormal volatility and the turnover will be unstable when thespeculative in the future market is very large.Third, we construct and analyze the theoretical model of overconfidence and theempirical model. By solving the utility maximized equation, we get the optimal tradingstrategy. It indicates that the trading volume will amplify with the enlargement of thedegree of overconfidence and private information. By solving the vector auto-regressionequation about the variables of volume and rate of return, it indicates that the privateinformation and public information have different effects on trading volume.Fourth, soybean, cotton and rubber futures contracts are empirically analyzed. Theircoefficients from the vector auto-regression equation are calculated individually, and theyshow that the overconfidence is popular and the private information has a significantimpact on trading volume by comparing the residual sequence diagrams and impulseresponse diagrams.At last, the thesis gives the main conclusion and policy proposals. Overconfidence isa common phenomenon in the future market; the investors overreact to privateinformation and the private information shocks bring some volatility in the future market.So it’s necessary to enhance investor education and to guide the investors to form therational investment ideas; and to improve the transparency of market information. The regulatory agencies should crack down on illegal activities. At last, we give some proposalfor further study.
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