A Research On Herd Behavior Of QFII In China

The QFII (the investors of foreign qualified institution) invest in Chinese stockmarket in2003. With the extension of investment quota, the QFII are making moreinfluences in our security market. To have a deeper and more comprehensiveunderstanding about the trading behaviors of the QFII, this paper makes whether herdbehaviors exist as the starting point and makes theoretical and empirical researches onherd behaviors in the QFII, then analysis herd behaviors in different types of stocktrading. This paper selects QFII transaction data from the fourth quarter2004to thethird quarter of2011to make an empirical analysis and get the following conclusions:1. The QFII have significant herd behaviors.2. At different times, the QFII herd behaviors are different. From the fourthquarter2004to the first quarter2006, the QFII showed unilateral buying behaviors,while in2008, the QFII showed unilateral selling behaviors.3. In the empirical analysis, herd behaviors and the scale of circulation of sharesare negatively correlated; stock historical rate of return and buying herd behaviors arenegatively correlated, and to the selling herd behaviors are positively correlated; thebuying herd behaviors and the market index are negatively correlated, and to theselling herd behaviors are opposite; stock price ratio and buying herd behaviors arenegatively related, and to the selling herd behaviors are positively correlated.Through the analysis, we find that the QFII investments in China havesignificant herd behaviors, and the concept of value investing is also not reflected inthe empirical analysis, however, the accurate grasp of the market and the “buy lowand sell high” investment strategies for individual stocks about QFII are worthy forChinese investors to learn. However, high degree of herd behaviors in China is boundto bring harms to Chinese securities market. This paper presents some policyrecommendations to reduce the occurrence of the QFII herding behaviors.