Empirical Study On The Herd Behavior Of The Open-Ended Funds In China

The securities investment funds have gained great progress in our country for the past few years. Both its assets scale and the market influence are expanding day by day. As an important part of the institutional investors, the securities investment fund is playing more and more pivotal role in the stock market. Among all kinds of securities investment funds, the open-ended funds' dramatic development has caught all our eyes. Since the birth of the first open-ended fund Hua'an Innovation in 2001, the open-ended fund is developing at an amazing speed, having been established more than 300 open-ended funds by far, going far beyond the close-ended fund to become the mainstream in the investment funds industry in China market. However, even being a professional institutional investor, securities investment fund has been proved to have shown some non-rational behavior, which is unable to be explained with those traditional financial theories established on the hypothesis of rational man. The Herd Behavior of the open-ended funds is just a case in point.First, based on the summary of the previous studies on Herd Behavior, the author have made some empirical studies on the investments of 62 open-ended funds in China market, using the data collecting from 2004 to 2007. The empirical study is made with LSV model to testify whether there is Herd Behavior among the open-ended funds in China market, and the result turns to be yes, very distinct Herd Behavior found in general. What's more, further studies are made to identify different characteristics of Herd Behavior, when the author divide the sample data into several groups according to fund type, stock scale, stock industries as well as different condition of the security market. Then, the author have tried to make some explanations on the possible causes for Herd Behavior among the open-ended funds in our country, and proposed some corresponding suggestion, as a reference for the investors in the security market and financial supervision departments of out government, to control the negative phenomenon in our country so that the investment funds industry, especially the open-ended funds industry may enjoy healthy development in the further.