| Author: | Qian, Haitao |
| Title: | An evolutionary perspective of the Chinese stock market via retail investors’ behavior |
| Advisors: | Xu, Xin (MM) |
| Degree: | DFinTech |
| Year: | 2026 |
| Department: | Faculty of Business |
| Pages: | vii, 193 pages : color illustrations |
| Language: | English |
| Abstract: | The retail-dominated, policy-oriented, and social-media-fueled Chinese A-share market means that the Efficient Market Hypothesis and Behavioral Finance alone are not able to fully interpret underlying trading patterns among retail investors. In order to address this research gap, This study adopts the Evolutionary Finance perspective, with its basis on the Adaptive Markets Hypothesis, develops and empirically validates a Triangular Evolutionary Model (TEM), which is built upon three dimensions: Emotionality as the trigger of trading, Adaptability as the strategy of reaction, and Profit as Fitness as the selection criterion. Under the stratified sampling technique, the qualitative research method is leveraged, along with the conducting of semi-structured in-depth interviews with 15 retail investors, who have a variety of trading experiences, diversified strategy exposure, and different age demographics. Interview transcripts (about 87,000 Chinese characters) were coded in NVivo 15 with a deductive, theory-driven thematic analysis structure. All 473 valid reference points were assigned into four first-level nodes (Emotionality, Adaptability, Profit as Fitness and Triangular Evolutionary Cycle) and ten second-level subnodes, which indicates an even structural distribution and high consistency of codes among all participants. The empirical findings strongly support the Triangular Evolutionary Model. First, Emotionality is deconstructed into three triggers: consecutive limit-up arousal (34.0%), opening sentiment (36.2%), and social media influence (29.8%), which together constitute a emotional activation system that ignite trading intentions before rational awakens. Second, Adaptability is composed of two core strategies: following the strongest sector (46.6%) and leader preference (53.4%), which indicates that the stock with capital-liquidity-sentiment consensus is the favorite choice for retail investors. Third, Profit as Fitness occurs by profit-driven retention (42.6%) and loss-driven elimination (57.4%). Fourth, the entire closed-loop cyclical mechanism is in sequential order of Emotionality → Adaptability → Profit as Fitness → re-entry into next cycle. This paper delivers three key theoretical contributions. We firstly localize the Evolutionary Finance into Chinese A-share market. Secondly, we integrate psychological research in Behavioral Finance with the dynamic adaptive logic from Evolutionary Finance. Thirdly, we develop a Triangular Evolutionary Model (TEM) based on empirical evidence that applies to Chinese retail investors. Practically speaking, this research will assist retail investors in understanding the market from a ground-breaking perspective of the Evolutionary Finance, and also provides feasible references for market governance and investor education. The study acknowledges its limitations on sample size, qualitative methodology, therefore, The Triangular Evolutionary Model (TEM) is exclusively for the retail investors in the Chinese A-share market with the short-term trade during the market environment of consecutive profit reinforcement Loop, hence is not generalizable to the institutional and professional traders, Meanwhile the quantitative algorithmic trading is treated as an exogenous market environmental factor in this paper. |
| Rights: | All rights reserved |
| Access: | restricted access |
Files in This Item:
| File | Description | Size | Format | |
|---|---|---|---|---|
| 9365.pdf | For All Users (off-campus access for PolyU Staff & Students only) | 2.72 MB | Adobe PDF | View/Open |
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