The Psychology of Small and Medium Investors under Different Market Environment

According to the expected utility theory, people with different risk preference have different psychology under the same rates of return. People with the same risk preference have the same psychology under different market environment. However, the prospect theory gave us another result. The psychology of investors is changing under different rates of return. Chinese securities market fluctuated widely in 2006 and 2007. We study the psychology of faculty and students in universities under the different market environment. We analyze the relation between the movement of stock market index and psychology of Small and medium investors. We found that the higher the rates of return the more positive attitude of the small and medium investors.