This paper constructed，based on the value function theory，a econometric model which can explain the impact of information flow on stock market return and return volatility. Then we applied the Shangzheng Index and Shenzheng Index to our empirical analysis. The empirical results show that the value function form can explain well the impact of information flow on return. Information flow and the investor’s behavior bias，which is described by value function，can explain the return volatility and its persistence feature in the Chinese stock market. Furthermore，investors’loss aversion behavior can give a good explanation to the asymmetric impacts of good information and bad information on the stock market return and its volatility. Meanwhile，the empirical research reveals that the graph of the value function displays a reverse S-shaped in Chinese stock market．