Empirical Test Of Herd Behavior Among China's Funds

The Southeast Asia financial crisis and technology stock bubbles in America's stock market have drawn more attention to herd behavior in financial markets, especially herd behavior among institutional investors.The explanation of herd behavior can be divided into two parts. One is based on classic finance theory, in the framework of human-ration. The other is based on Behavioral Finance Theory, in the framework of human-irration.The empirical tests of herd behavior include the tests of stock prices and the tests of investors' trading, and the latter can be divided to tests of institutional investors and of security analysts. We introduce Lakonishok, Shieifer and Vishny(1992)(LSV) empirical test of herd behavior among institutional investors. The existing tests of herd behavior among china's fund are not satisfying because of the limitation of data. We here use LSV's method and collect comprehensive data of funds' trading to test the herd behavior among funds in China's stock market. The results show that herd behavior among China's funds is more serious than funds in America's market, moreover, our herd behavior shows some special features. The causes of our herd behavior lies on many factors such as policy-making, trading mechanism and funds' interior arrangement. So it requires the administration and all market participants' efforts to relieve or eliminate herd behavior among China's funds.