An Empirical Study Of Herd Behavior And Stock Market Bubble

In this paper, Shenzhen stock market is chosen as the research object. And, thestudy samples come from the Shenzhen Component Index and its historicalcomponent stocks as well as the latest component stock’s daily closing price data andthe weekly closing price data from January21,2002to December31,2011. When thedynamic autoregressive test is utilized in Shenzhen stock price, it is obviously thatthere was a bubble during the period from October2006to December2007. TheA-CCK methods and sliding window method are applied to examine the herdbehavior of Shenzhen stock market from static and dynamic perspective.Consequently, in the both medium and long term and short term, a strong herdbehavior presents in Shenzhen stock market. Moreover, there is the first empiricalresearch on the relationship between the stock market bubble and herd behavior andits impact mechanism by using linear Granger causality test and nonlinear Grangercausality test method. As a result, the effect mechanism between them is followed: atthe beginning, the bubble enhances the herd behavior that causes the furtherexpansion of the bubble; finally, they show a relationship of mutual guidance andpromotion.