The Herd Behavior Of Mutual Funds In China And Its Impact On The Stock Prices

Funds in China developed very fast recent years, but its function of keeping security market steady is not obvious. So it's very meaningful to study the herd behavior of mutual Funds in China and its impact on the stock prices.The paper explains the definition of herd behavior, looks back upon the studies of "the herd behavior of mutual Funds in China and its impact on the stock prices" in China and abroad, and then analyzes their weaknesses.The paper modifies the model of Herding Measure of Mr. Shi Donghui by the thought of Wermers. It not only studies the whole herd behavior of mutual Funds in China, but also studies the buying and selling herd behavior to use the data from the second season in 2005 to the second season in 2007. It also studies the stocks with different characters such as prices by earnings per share, current market value and abnormal returns last season, and analyzes the buying and selling herding measure. This paper also judges whether it's genuine herding or pseudo herding.The paper analyzes the impact on the stock prices of the herd behavior through studying the relation between the herd behavior and the abnormal returns last season, the very season and the next three seasons. It compares the herd behaviors both in China and in America and concludes the problems in China led by herd behavior.The paper introduces the theories why the herd behaviors come out, and comments those theories. It analyzes the reasons why the herd behaviors come out from the aspects of security market and investment funds.In the end, the paper gives some counter-strategies for the monitoring and governing of the investment funds in China according the results of empirical studies and the present security market situation in China.