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Analysis, Investor Herd Behavior Based On Behavioral Finance Paradigm

Posted on:2007-10-24Degree:MasterType:Thesis
Country:ChinaCandidate:H TangFull Text:PDF
GTID:2209360182481747Subject:Finance
Abstract/Summary:PDF Full Text Request
The field of traditional financial theory is built on the assumption that investorsbehave with perfect rationality which is one of the influences of the rationalism uponeconomics. But more and more anomalies in securities market have doubt of theassumption that investors are perfect rationality. Combining with classical economics,behavioral finance is set on the basis of precise definition of rational and irrationalbehavior of investors."Herd behavior" in the securities market is a kind of special irrational behavior, andwe define it is a kind of behavior in a situation that the environment of the information isuncertain, the behavior is influenced by other investors,imitating others and makingpolicy, or depending on the public opinion excessively (namely the idea of theoverwhelming majority in the market), without considering one's own information.Because the herd behavior involves with relevant acts of different investors,it hasstrong influence on the stability and efficiency of the securities market. Otherwise, thereare close relations with the financial crises, too, so it has caused the academia andgovernment to pay the extensive attention to the research of the herd behavior and presentseveral practical theories.In this paper,I try to research on the "Herd behavior" of the investors. The papergives an empirical description of the main irrational behaviors of the securities market,which are explained with the theory of "Herd behavior". Also I establishe a mathematicalmodel to explain these irrational behaviors. At the end of the paper, I offere somerecommendations to correct the irrational behaviors of the securities market.
Keywords/Search Tags:Behavioral Finance, Investors' Behavioral Theory, Herd Behavior
PDF Full Text Request
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