The Impact of Information Asymmetry on Investment Behavior in the Stock Market

Abstract

The stock market is the main component of the capital market and plays an important role in promoting the development of the national economy. Information asymmetry, as a typical issue in China’s stock market, triggers stock price fluctuations, increases stock market risks and largely influences investors’ investment behavior in stock market. Therefore, improving the information asymmetry problem is of great significance for the stable development of the stock market. This paper depends on the nature of information asymmetry, explores its specific manifestation in the stock market, and then analyses the process of information asymmetry issues on investment behavior. Studies indicate that information asymmetry leads to misdirected investment from three aspects, which include judgment on individual stock, assessment of the market value of the company and expectations of stock market developments, resulting in investor losses. Based on the above conclusions, this paper puts forward recommendations for improvement in terms of market regulation and the legal system: to improve the transparency of stock market transactions through the disclosure of information by regulators and companies. To complete the legislation of the stock market and establish strict punishment mechanisms to ease the problem of asymmetric information and maintain the stable operation of the stock market.