China's Securities Market Industry, Systemic Risk And Herding Study

Research on the risk structure of different countries and regions, especially the emerging stock market has always been the focus. But the results vary largely due to the difference in the sample selection and time horizon. And these researches mainly focus on the risk structure of the whole market instead of industries. The paper calculates the proportions of the systematic risk to the total risk of main industries every year to make a study of the relationship of the changes of these proportions between various industries using the clustering method stage by stage. The clustering result of the years forms the stage. We find that the changes of the systematic risk structure are greatly affected by polities so that voiding the polity risk is the main measure to control the systematic risk.Herd effect has been another research focus recently. There has been a relation between the herd effect and systematic structure. Although researchers have noticed it, relevant researches lay more emphasis on the calculation of them instead of the interaction of them. Most results are based on the hypotheses. The paper calculates the HB index of Mutual Fund investment strategies of Chinese from the second quarter of 2001 to the fourth quarter of 2007 using a special model. It founds that different mutual funds in China have the same preference on the industry selection and the industries they choose have the same systematic structure in bear market. It has negative influence on diversification. Meanwhile, HB index changes with the market index. But the herd effect decreased insignificantly in 06 and 07, which is contradictory to the previous research. The paper also makes a study of the interaction of the change of systematic risk and herd effect of mutual fund using Granger method.The results have practical meanings. It helps the investor and certain departments to be informed of the relations of systematic risk between various industries. It also provides another way to solve the problem that the stocks go up and down at the same time in China currently. That is the improvement on the information disclosure of listed company and the education to public investors. The supervisors should also be prudent whenever issuing the policies to void the similar investment strategies among mutual funds.