Herding Behavior In China’s Futures Market Of High Volatility Period

Development of behavioral finance makes people realize that there are many phenomena that cannot be explained by the theories of traditional finance on the market, herd behavior is one of those. In the context of the 2008 financial crisis, China’s financial markets suffered a huge impact and challenges. This paper focus on the herd behavior of Chinese commodity futures markets under extreme risk of the crisis.This paper first introduces the theory and research related to herd behavior and significance of extreme risks. These theories provide important reference ideas and methods. Purpose of this study is to identify the presence of herd behavior, thus providing a theoretical support for the specification and to avoid the transactions risk of Chinese commodity futures market.The main background and the nature of the herd behavior theoretically explain the inner mechanisms of meaning and herd behavior under extreme risks arising from the background. This is the principle of the article theoretical support and empirical research lies. In research methods, we use CCK test, which is the classical model of herd behavior, and based on a Markov model of the regime switching mechanism to convert the theory of the state CCK discrimination, trying to distinguish the existence of differences in herd behavior under different time periods. In selecting the data, the paper uses the 5 minutes futures trading data, which is based on a better understanding of the behavior of the herding:herd behavior in the market’s performance may be based on short-term market impact. Finally, based on empirical results, we concluded that herd behavior is a significant presence during the extreme volatility of the market.