Arch Model-based China A-share Market Herd Behavior Empirical Study

" Herd behavior " in the securities market is a kind of special irrational behavior, and we define it is a kind of behavior in a situation that the environment of the information is uncertain, the behavior is influenced by other investors, imitating others and making policy, or depending on the public opinion excessively (namely the idea of the overwhelming majority in the market), without considering one's own information.Because the herd behavior involves relevant acts of different investors, it has very heavy influence on the stability and efficiency of the securities market. Otherwise, there are close relations with the financial crisis too. So, it has caused the academia and government to take the extensive attention to the research of the herd behavior.This paper uses ARCH model method in econometrics to set up an auto-regression model with different variance characteristic, which catches to the signal of herd behavior that can be comparatively sensitive. Basing on the sample stocks of the Index 180 of SSE for studying sample, author conduct empirical tests on the non-linear relations between CSAD (Cross-Sectional Absolute Deviation of returns) and the market returns to judge whether the herd behavior in the stock market of China is remarkable. According to the empirical analysis, author finds, both in the up-market and down-market, certain herd behavior exist on the stock market of our country. Besides, this paper carries on the deep analysis to the result of empirical evidence through comparative analysis, and carries on brief analysis to some simple reasons of the herd behavior. As a result, some suggestions are proposed to how to control the herd behavior.