Does ST Stock Exist Herding Effect

With only 20 years history of Chinese securities market exists the phenomenon of frequent stock price volatility and speculation prevails all the time, and investors follow behavior and herd behavior often lead to abnormal fluctuations in stock price. As ST stocks whose stock trading get special treatment by the Chinese stock market for some listed companies with abnormal problems in operation and finance, they have always been the hot fields that investors concern about and sought after.Herd behavior has a significant impact on the stock market, especially in terms of Chinese stock market that is in the transition economy, in recent years, the herd behavior of investors has become an important reason of causing the volatility in the stock market and system risk of the market. For those relatively rational and mature institutional investors, there have been no clear and accurate answer whether there exits herd behavior and what extent of it. As the initiator of the herd behavior of stock market investors, especially the majority of individual investors are blamed much because of this, because individual investors are often considered to be participants that is irrational, lack of expertise, keen to follow the trend. Herd behavior involves related behavior of multiple investment entities and it has great influence upon the stability of the market and close relation with financial crisis, so the herd behavior aroused widespread attention of academic and government regulators. Based on the important role that herd behavior plays in the stock market and its significance, this article attempts to measure the degree of domestic ST stock herding behavior on the basis of review related theoretical analysis and empirical research, analyzes the characteristics and development trend of herd behavior, reveal effect that factors such as policies and systems to ST herd behavior in a certain extent in order to provide a reasonable basis and policy reference for the reform of Chinese stock market and improve the development, and at the same time the research about ST stock market volatility risk will not only improve investors’ risk awareness and self-protection awareness, raise the level of investment of investors, but also make ST segment develop more healthy and stable.The paper first analyzes the manifestations and causes of ST stock market, finds that their maturity and financial condition are significantly worse than the listed companies of broader market. Then by the cointegration test, this article derives that ST stock herd behavior has a significant impact on the ST stock price volatility, but ST stock price volatility has no impact on the stock ST herd behavior; the impact of stock market ST herding behavior on the ST stock price volatility in Shanghai is greater than the impact of of stock market ST herding behavior on the ST stock price volatility in Shenzhen. At the same time, the paper uses CSAD-GARCH model to find that there exists herding effect in ST stock indeed, and herding effect of ST stock in Shanghai is more significant than in Shenzhen, herding effect of ST stock is more significant than non-ST stock and herding effect of rising period of stock price is more significant than felling period of stock price. Theories and models of the herding tests discusses in the second part. The third part is Chinese ST stock market reality performance and reason analysis, the fourth part is the empirical part and consists of two empirical test, the first is the test for herd behavior of ST stock, the second is an empirical study of relationship between ST stock herd behavior and stock price volatility. The last part is the conclusions and policy recommendations in this paper.