Abstract:After developing for more than20 years, the Chinese stock market is still far from mature compared with those of the developed countries. The state policy exerts an extremely huge impact on the stock market. Favorite policies stim- ulate abrupt rises in stock market and individual shares while adverse policies incur cliff-like drops. Our analysis found that the fundamental causes for abrupt rise and fall in the stock market have much to do with the absence of supervision, misplaced su- pervision or inadequate supervision.