The Effect Of Investment Funds' Herding To Stock Price Volatility

From the Shanghai stock market being established on December, 1990 till now, the China stock market only has a short history of 16 years. The market is imperfect with investor's mutual imitation universal existence. At the same time, there are frequent, substantial fluctuations on stock price in our market. Is there any essential link between the two phenomena? We cannot know the explicit answer now. On the other hand, Chinese securities investment fund has achieved comparatively great development since changed the system from old fund to new fund in 1998. As an institutional investor, securities investment fund plays a significant role in security market. However, it also has an irrational side, and herd behavior is one kind of these irrational acts. Whether our securities investment fund has remarkable herd behavior or not and how is the extent. All of these problems need to be answered urgently. About this topic, the former empirical researches had obvious blemish. So this dissertation reviewed recent theoretical and empirical development of herding behavior on financial market, but mainly investigated the impact of herding on stock prices.This dissertation is divided into four chapters. Chapter one summarizes the previous studies of herding, brings forth the topic and points out the theoretical and practical meaning of the research about herding behavior on capital market. After providing a clear investigation of the development condition of China securities investment fund and the characteristic of our stock price volatility, Chapter two introduces the research status and reviews the theoretical research accomplishments according to the category of herding behavior causes. This chapter also investigate the relationship between herding and financial bubble, herding and financial crisis. In order to answer the question whether our securities investment fund has remarkable herd behavior or not and how is the extent, the third chapter applies LSV model into the practice of our stock market. On the basis of this the fourth chapter uses the panel-data model and clustering analysis to investigate whether the herd behavior could aggravate the stock price volatility.The results show that there is serious herd behavior in our stock investment fund, and it has a remarkable positive relationship with stock price volatility, which indicates that our investment funds industry does not have the ability to maintain market stability. The result supports the view that investment fund's herding undermines the stability of the stock market. In order to control such a negative phenomenon, some suggestions...