Empirical Study On Herd Behavior Of Chinese Metal Futures Market

The Capital Asset Pricing Model (CAPM) and the Efficient Markets Hypothesis (EMH) are the basis of the theory of traditional financial theory. However, these traditional financial theories are questioned, both on theory and practice by scholars since 20th century, which led to the naissance of behavioral finance. As an important area of behavioral finance, the herd behavior has been paid significant attention on. The so-called herd behavior which is a group consensus to alter behavior describes how individuals in a group can act together without planned direction. Herd behavior is currently much focused on the stock market while less in futures markets, so this research has certain practical significance.Proceed with the concept of herd behavior we distinguish spurious herding from intentional herding and analysis its effect on financial markets, as well as summarize relevant theories from both domestic and foreign scholars. After that, we take stationary time series unit root test and ARCH LM test to the Chinese metal futures markets data from January 4, 2005 to December 31, 2008 and the result shows that the sample dates are steady but autoregressive conditional heteroskedasticity is existed. On that basis, we take the Chinese metal futures markets for herd behavior empirical study using CCK model and GARCH model. We found that there is no significant herd behavior in metal future markets. Considering that bull and short mechanism exists in China's metals futures markets, the rising phase and decline phase movement should be symmetrical, so we did not pay attention on both sides respectively. Finally, the paper that China's metals futures market, there is no herd behavior by the participants, trading system, trading objects, as well as the special nature of the pricing mechanism and determined. The author believes that the market participants, trading system, trading object and the distinctive feature of the pricing mechanism are the result of the difference between the future market and stock market.