An Empirical Research On Herding Behavior Of Securities Investment Funds And It's Impact On Stock Prices In China

Many scholars assume that herd behavior of funds is a key factor, which results the fluctuating in stock prices in the whole stock market. In order to testify whether herd behavior of funds exits and whether it influences stock prices in the whole stock market in China, this paper researches the following aspects. First, it testifies the existence of herd behavior of funds and that of the whole stock market. Second, if both of them exist, it compares herd behavior of funds with that of the whole stock market in order to prove whether herd behavior of funds makes stock prices fluctuate in the whole stock market. This paper makes an empirical research. Based on funds holding stocks sample and whole stocks sample, it uses CCK adjusted model to test the existence of herd behavior of funds and that of the whole stock market. Then, it inserts dummy variable Dt in CCK adjusted model to testify whether herd behavior of funds and that of the whole stock market are the same in scale to prove whether herd behavior of funds makes stock prices fluctuate in the whole stock market.The research result shows: (1) herd behavior of funds exists statistically significantly; (2) herd behavior of the whole stock market exists statistically significantly as well; and (3) herd behavior of funds and that of the whole stock market are the same in scale, so herd behavior of funds doesn't make stock prices fluctuate in the whole stock market. The reasons are that: (1) the similar information fund managers get, certain styles of stocks funds tend to hold, reputation risk fund managers take, the relationship of client and agent existing in funds and fund managers and other special reasons in stock market in China lead to the existence of fund herd behavior; (2) because of government intervention in macro fields and shortage of information disclosure in micro-information, herd behavior of the whole stock market exists; and (3) herd behavior of funds and that of the whole stock market are the same in scale because funds have small share in the whole stock market in China.