The Research On The Irrational Factors Impacting On Herding Of Individual Investors

Herding which may be affect information tide, price fluctuation, and finance crisis seriously, is an abnormal situation in security markets. Individual investors are weak in the market. Because they are interfered with noise and they are restricted with asset, educational background and so on. They easily give up their decision-making and follow others. Concretely, they often follow institution investors and other individual investors, which form herding in security markets. Researching the irrational factors of herding impacting on the individual investors is propitious to definitude mechanism of herding and establish resolvents for the researchers on the one hand. On the other hand, investors can choose valuable securities according right information. Widely, government can make the securities price move in a certain range, which will lead security markets to healthy.This passage analyzes the irrational factors affecting on herding of the individual investors. It divides these factors into the external irrational factors and the inner firstly. The inner is noise and the external is the deviation of cognition and behavior. The external factors analyzes yearly turnover and combines with their herding existences of the main security markets in the world. It proposes the hypothesis that noise may be affect herding. Then We revise assumption conditions of the herding model containing noise on the bases of predecessor's research and prove rationality of the hypothesis. The inner factors can be included into availability, confirmation bias, mental accounting, regret aversion etc.The reasons are light invests consciousness, weak fund strength, small investment scale, limited specialized knowledge and the difficulty in gaining real information .On this base, we get the relationship of all irrational factors with the help of the DEMATEL method. Simultaneously, we find that noise and excessive response are the most primary factors. We construct the herding model of the individual investors under the irrational condition. In the model, one supposition is that the negotiant is risk neutral and rational. The other supposition is that the investors especially individual investors who acquire real information are irrational. We found irrational herding model of individual investors with the securities transaction mechanism and Baye as well as the utility function of the information gainers. Finally,...