A Recent Empirical Research Of Herd Behavior In Shanghai And Shenzhen Market Based On ARCH Models

Herd behavior-Investors made without rational thinking and imitate others. It is atendency that they swarmed on investment or scattered on investment-has been gotmore and more people’s attention. Herd behavior theory development is graduallybecoming more mature. ARCH model to study the problem of the economy is a veryeffective method.Based on the ARCH model,using the SSE50Index and Shenzhen Component Indexas the sample, the time interval is from1/5/2012to2014/1/10, using the cross-sectionalabsolute deviation as the main research targets, this paper made a model test to Shanghaiand Shenzhen stock market. The study found: two markets have significant herd behaviorduring the near time, and the Shenzhen stock market’s herd behavior is more significantthan the Shanghai stock market’s, and the herd behavior in chasing is a little moreobvious than in killing fall. And the herd behavior in Shanghai stock market is moresignificant than in Shenzhen when the stock market is in upheaval stage. It also foundthat when the market is in a short period of stable fell stage we also can find herdbehavior in the stock market using CSAD. The paper has give reasonable explanationand operational recommendations.