Research On Herding Behavior In Chinese Securities Market

The classic financial theory is based on the assumption that people are rational. But the behavioral finance which has risen lately, on the contrary, is based on the assumption that people are irrational. Herding behavior is one of the research aspects of behavioral finance. On the premise of trading in the short term, noise traders may assemble on some information and rumors that even are completely irrelative with the basic value of securities. That will make the resources be collocated unreasonably, and herding behavior come into being.In this dissertation, the empirical research on our securities market during the time from January 1999 to July 2005 indicates that there is obvious herding behavior in our stock market. Although in the same macro economic environment, nevertheless, there is not in our futures market.Herding behavior is a kind of cohort behavior. The obvious herding behavior in our securities market results from the institutional defects, and it is the behavior choice of investors in the specific market environment. On the one hand, the dissevered shareholder structure makes the holding shareholders have little motivation to improve the intrinsic value of securities, sequentially, the invest value of listed firms decline, even lost. The incomplete information destroys the essential basis which investors depend on to make decision. Accordingly, there is only the efficient government supervision that investors can rely on. But the continual government intervention in the market, the impotent supervision and the unstable policies make investors more unsure about future. In such a speculative market, investors are very uncertain about the future, thereupon, the proper cognitive bias of human being is evident. And then a lot of irrational behavior, that are noise trade which are less than perfect rational, come into being. On the other hand, the restricts such as the fundamental risk and so on cause rational arbitrage to be ineffective. For the healthy development of our securities, we should reform the system. And liquid stocks, more complete information and more effective supervise are indispensable.