The Empirical Study Of Herd Behavior In Chinese A Stock Market

"Herd behavior" is a concept which is from biology. But when the concept applies to the stock market, it means the investors ignore their private information and take the same action with others. Herd behavior has the different effect on the market and it reflects the stability and maturity of the market. This paper analyzes the herd behavior of the Chinese stock market, including several aspects as follows.The first, introduce some concepts about herd behavior. Different scholars have different definitions and the methods of classification. This paper has pointed out the definition and the method of classification, which are suitable for the research. At the same time, this paper has talked about the reasons of herd behavior, including psychology, sociology and the information flow. The herd behavior has influence on the market:stabilize the market or make the market unstable.The second is the research of the herd behavior’s theory. The reasons of the forming of herd behavior have three classical models:the herd behavior based on incomplete information, the herd behavior based on fame and the herd behavior based on reward. These three models explain the reasons of the herd behavior in detail. At the same time, the noise trading and the positive feedback trading have deep relationship with the herd behavior. This paper explains the concept of the noise trading and the positive feedback trading respectively. And this paper analyses the relationship about the herd behavior, the noise trading and the positive feedback trading. The herd behavior also has brought the momentum effect and the reversal effect. The momentum effect means the outstanding achievement of the stock will continue. The reversal effect has the opposite concept. According to the momentum effect and the reversal effect, there are two strategies. They are momentum strategy and contrarian strategy. This paper explains the application of the two effects and the two strategies, expecting it works for the investors. This paper summarizes the methods of empirical study, including the method of LSV, PCM, CH, CCK and NS.At last, this paper applies the model of CCK to the Chinese stock market to analyze the herd behavior. This model use CSAD as the index. This paper explains the forming of the model in detail. The data is from Shanghai stock180 and Shenzhen100. The period is from 19th October,2007 to 1st July,2009. And according to the ascent stage and the descent stage, this paper has made the empirical study for the Shanghai stock and the Shenzheng stock respectively. The result shows that the herd behavior of Shenzhen stock is stronger than the herd behavior of the Shanghai stock. At the same time, when the period is in the descent stage, both Shenzhen stock and Shanghai stock have the obvious herd behavior. This paper also has divided ten industries to make the empirical study. The result also shows that these industries have obvious behavior in the descent stage, especially the industry of finance and real estate. According to the result of the empirical study, this paper combines the character of the Chinese stock market to analyze the reason of the herd behavior in china. From the investors’angle of view, this paper point out some advices for the investors to avoid losing heavily. The main innovative point of this paper is the quantification of the herd behavior, expecting the investors could judge correctly according to the value. Then the investors could choose the corresponding investing strategy.