The phenomenon of currency illusion of "absolute price" in stock market

⊙ Societe Generale Global Fund Xin Yuanzhao "currency illusion" is an economic term that discusses the psychological illusion caused by inflationary effects, meaning that when inflation occurs, the real purchasing power is declining and the currency is less valuable, but people ignore the fact because of the psychological illusion. There are similar phenomena in the stock market, which we call "absolute price" currency illusion. When the absolute price of a stock or investment is low, investors always think it is cheap, logically, since the cheap, then the "bargain" there is a theoretical basis for the rise in the cheap, the absolute price of things naturally popular with investors, this "absolute price"　　The illusion of currency can provide explanations for many peculiar phenomena in China's securities market. First, the currency illusion is an important "theoretical base" for speculation about low-priced stocks. Perhaps the valuation of the stock is too complex for the ordinary people, and the absolute price as an alternative to the valuation of the high and low is taken for granted. The flaws in our markets have made this mistake not only reinforced but not corrected. We will often hear the market talk about having eliminated 1 or 2 yuan stocks and so on.　　Unlike the Hong Kong market, the Chinese market has almost no long-term emergence of the phenomenon of cents, I am afraid that the currency illusion at work also has a certain relationship. Second, when the absolute price of the warrant is lower when the launch, but also to get the market frenzy sought after, when the right to hype the most crazy time, warrants prices are fried more than the positive share price. After more than 10 years, now the warrants market is still highly speculative, many investors did not even understand what the warrants came in, waste paper a warrant, in the final two weeks will still be high to a few dollars.　　Although the final result is often a high dive, the price return to zero, but still can not stop speculators to enter the speculation. There is also a phenomenon can be interpreted by the currency illusion, that is the Chinese market keen to increase speculation phenomenon. Once a stock can be sent high, such as 10 to send 10, almost means that the stock will be 50 percent sold immediately, the so-called "right to fill" market followed, and at all, regardless of the fact that equity also increased by one times, the total value has not changed. Plainly, this is a parody of the cake "game, the cake itself has not become larger, the increase is only the number of pieces cut." The highly-tried high-rise game is also a peculiar phenomenon in China's stock market.　　It can be imagined that if the Chinese market, like foreign countries, would allow free stock splits, it would be as strong and free as a positive stimulus. We want to conclude by emphasizing that the value of a stock or warrant has little to do with its absolute price level. Low-priced stocks in the Chinese market have long been cheap and often overvalued. Any monetary illusion is a psychological illusion, in China's stock market to mature process, as soon as possible to recognize this illusion, may be able to avoid a lot of losses.