An Empirical Study On Herd Behavior In The Chinese Stock Market

Herd Behavior is a phenomenon existing in financial markets widespread. It is conscious to imitate other investors decision calls Herd Behavior, which refers to other investors as a result of the investment strategy adopted by some of the effects of the same investment strategy, that is the choice of investors is totally dependent on public opinion, or the choice of investors is a public act of imitation, or over-dependent on public opinion rather than digging their own information. It is the key to the behavior of other investors will affect the individual's investment decision-making, and then affect the result of his decision-making. Because it has great impact in the market stability and efficiency, it become of the important studies that a lot of finance economists since 1980's. Every country academia, the investment community and regulatory authorities around the world's financial markets have to carry out empirical studies of herd behavior.In the development of Chinese stock market and the gradual process of maturity, there is the overall quality of stock is not high, the securities market has a history of short, non-standard features, there have been fluctuations in the frequent, the prevalence of the phenomenon of speculation. It is easy to take to follow the trend of behavior, resulting in herd behavior, and ultimately may lead to the stock market bubble, triggered a financial crisis. Therefore the study of Chinese stock market has a significance of Herd Behavior.In this thesis, first the basic theory of Herd Behavior has been reviewed by the basic theory of Herd Behavior into a review of the various causes of Herd Behavior. Then the experts and scholars to study the behavior of the stock market flock to the description of an empirical model, pointing out that the empirical models of the advantages and disadvantages, and Herd Behavior index of the HS model is so far the best model for empirical studies. Then experts and scholars to study at home and abroad herd empirical articles are reviewed, pointing out that the merits of the various papers and weaknesses. Followed by the empirical part of this article, The 300 samples of Shanghai and Shenzhen 300 index are used to research and analysis the Herd Behavior of Chinese stock market with HS model. Paper concluded that the herding behavior exist in the rising phase of index and in the down phase of index. And the degree of herding behavior in the rising phase of index is higher than in the down phase of index. The next conclusion is that the degree of herding behavior in the phase of sharp fluctuations is high than in the phase of Stability. After these conclusions, the paper points out those investors need a rational investment in order to avoid herd behavior led to the failure of the investment. And the paper also points out the government and financial institutions, regulatory authorities also need to establish laws and regulations, strengthening financial supervision, in order to effectively guide and help investors to invest in a rational manner to reduce the herd behavior of Chinese stock market.