Abstract: In China′s stock market，stock price deviates from its intrinsic value for a long time，which leads to the securities market resource allocation function cannot fully play. Based on the behavioral finance theory and information asymmetry theory，this paper studies the relationship between earnings smoothing，investors heterogeneous beliefs and mispricing，and analyzes the generation mechanism of asset mispricing. The results show that investor heterogeneous beliefs has a positive impact on asset mispricing，and the improvement of earning smooth can significantly relieve the positive impact on investors heterogeneous beliefs to asset mispricing; compared with the implementation of margin trading system，the positive influence of investor heterogeneous beliefs on the overvalued share price is significantly enhanced, and the alleviating of earnings smoothing is more prominent after the implementation of margin trading system. This shows that the introduction of margin trading in China has little effect on improving the efficiency of stock pricing. Therefore, we should objectively and fairly recognize and evaluate the positive role of earnings smoothing behavior in reducing asset mispricing, but we must also strengthen management to prevent from forming earnings manipulation because of excessive use of earnings.

Key words: earning smoothing, investor heterogeneous beliefs, asset mispricing