Research On Herd Behavior In Chinese Stock Market

"Herd behavior" in financial market can be defined as investors who takes the same investment strategy with others when being affected by the othres,it can be acted as investors give up his own investment pholisophy,and follow the others decision and behavior after observing most of the other participants'behavior. Herd behavior theory involves not only the relationship between behavior of multiple subjects'transactions,but also have great impact when explaining the effectiveness and stability of the market.So it has been widespread concerned in academia erea, also attracted great attention by governments. Classic empirical model of herd behavior did not distinguish between genuine and pseudo herding behavior for the different effects of the market,so this thesis studied the herd behavior within Chinese stock market in the scope of inflation.Specificly,while we summarized the theory and the empiric of herd behivior in financial market.This paper discussed the mechanism of pseudo herd behavior. After that,we invovled the element of inflation.We conclude the period of low inflation driving up the stock market,the period of high inflation drive down the stock market. On this basis, the paper selected Shanghai 50 constituent stocks and the Shenzhen Component Index as the study sample,used CH method and CCK method based on ARCH comparatively to study the significance of the herd behavior.Meanwhive,this paper divided the whole period into several parts according the level of inflation and the trend of the market,using the regression test on each part. Finally we got the conclusion that the entire period has got significant herd behavior.And it was more significant when the market was extremely falling than rising.But the character of herd behavior is different in different parts.At last, the conclusions of this study are summarized.With these conclusion,we make the suggestion on how to avoid the truth herd behavior and how to guide pseudo herd behavior.