A Model Of Herd Behavior In The Securities Market

Herd behavior in the securities market is the phenomenon that the investors, facing uncertain circumstance , neglect their information and follow someone else . Herd behavior greatly affects the stock prices and the difference of the profit between investors. So it is very important for the securities study field and the securities management department to study the stock price fluctuation and the profit between investors under the right or wrong market signal when herd behavior occurs.Immanent principle and reason of herd behavior are analysed, market reaction of herd behavior is expounded, and positive or passive result of herd behavior are clarified in the paper. Herd behavior models of internal and abroad are looked back, the actuality of our securities market are illuminated, too . Herd behavior is common in the Chinese securities market at present. Most of the studies qualitatively focus on the relatives between leading and following investors, so the paper quantitatively establishs a model about the relatives.A herd behavior process is imitated in isolated securities market and four juncture are presumed. At the same time, three investor objects are supposed. Leading investors can receive the signal about the value of securities . Following investors cann't receive it and only follow leading investors through positive feedback. Deliverant investors are postulated to decrease market risk . The model by means of the equilibrium condition of market of four juncture is found. Through the parameter hypothesis and the conditions having noise signal or not, the price fluctuation formed by herd behavior and the difference of the profit between investors are quantitatively discusss in the paper.Through calculating, some conclusions can be draw. Under any signal, the price fluctuation of securities is notable if there is herd behavior. Leading investors have more profit than following investors in most time . The difference of the profit between investors decreases when there are more leading investors .According to these conclusions, some advices are put forward. We should emphasis right invest concept, reinforce the publication of information, decrease the cost of trading information , develop invest fund and improve invest environment.