An Empirical Study Of Herd Behavior And Stock Market Volatility

In this paper,we use Shanghai stock market as the research object,based on the daily yield data of 180 Index constituents stocks since the release date, the time interval is from the July 1,2002 to March 14,2013. Using the absolute volatility describes the stock market volatility.Using the A-CCK model empirically tested the herd behavior of Shanghai stock market,we found significant herd behavior in the studied interval.Greater degree of herd behavior is detected in the period of intense volatility,and the herd behavior degree is greater in the sharply rising phase than in the sharply fall phase.This paper introduces a "sliding window" technique, empirically tested the extent of herding trends over time. And empirically tested the extent of herding trends of the stock prices rising and decline phase over time.Consequently,in the both medium and long term and short term,a strong herd behavior presents in Shanghai stock market.In the use of a "sliding window" technique to observe the trends of herding indicator over time, the results showed, a "sliding window based on the CCK model ", the herding level reaches the maximum in the time interval from 2005 to 2008. At the same time, the stock price was at the peak stage during 2006 to the end of 2008. This shows that to some extent, herding caused the stock price artificially high. This to some extent explains that excessive herding has a great relationship with the latter economic recession.Moreover,in this paper we studied the relationship between herd behavior and the absolute volatility from an empirical perspective by using linear Granger causality test and nonlinear Granger causality test.As a result,the effect mechanism between them is followed,and the the herd behavior is the Granger causality of the absolute volatility.