Keynesian Beauty Contest: A Case Study of China Warrant Market

摘要

A Keynesian beauty contest is a concept developed by Keynes (1936) to explain price fluctuations in equity markets. People price shares not based on the fundamental values they though, but rather on the fundamental values they think everyone else thinks.The beauty contest game is an appropriate experiment to test the behavior of economic agents.China warrant market is a perfect example of Keynesian beauty contest, which will help us understand the formation of security price bubbles and the investment decision-making process. This paper analyzes the reasons of the excessive speculation of China warrant market and provides some solutions to it.