Research On Herd Behavior In Securities Market Based On Bank Rate Policy

With the development of behavioral finance, more attention has been payed to herd behaviors as one important field of the former subject. However, it's believed the political factor should be included in the research on herd behaviors given China's policy situation. Classic herd behavior models comprise the index of earning yield to embody the effect of rate as an endogenous variable while the author intends to take the rate as an exogenous variable in the research on the herd behavior in securities market of China.The thesis starts with the literature review and theoretical analysis. This part consists of the clarification and identification of the definition, types, and formative mechanism; then the elaboration of how rate policy affects securities market, the compare and comments among the classic herd behavior models; last the introduction of the ARCH model and its test methods.After that, daily closing price data for over one year of the bank stock in securities market of China was sorted out to do the empirical study in the approach of CSAD model. The author divides the whole observed period into 3 parts according to different rate policy condition and checked the data of each part whether there is ARCH effect in it then apply the ARCH model when the result is positive and the LS model when it's negative. Then the article draws the conclusion that there exists rather obvious herd behaviors on the whole sample period with respectively characteristic on each of the 3 divided period.Afterwards comes the theoretical explanation part analyzing why there exists herd effect in Chinese securities market, illuminates rate's impact on the market and uncovers why herd behaviors in different period represent different characters. It turns out that herd behaviors in Chinese securities market are affected by both the tendency of the market and the rate policy in different ways. One specific herd behaviors presentation of each period is a mutual result of those 2 forces with regard of their directions and powers.At last, the final conclusion is drawn with suggestions about how to avoid irrational herd behavior as well as how to make rate policy guide and adjust securities market properly.