Research On The Impact Of Herd Behavior On The Efficiency Of Stock Pricing In Margin Trading

After the 2015 stock market crash crisis, herd behavior under leveraged margin market has been considered an important factor to cause market volatility. This led scholars wonder if margin market can lift short-selling restrictions and improve the efficiency of the stock pricing.Previous literature explore the changes of stock pricing efficiency mainly based on the double difference mode and indicators such as dummies margin trading volume and so on. This article investigates the effect of margin market on stock pricing efficiency from the angle of herd behavior.Based on the review of the relevant theoretical and empirical research this article make a depth study in herd behavior in margin market and its impact on the stock pricing efficiency. Using weekly and daily transactions of margin market, this article computes the index of stock pricing efficiency from the angle of volatility, synchronization and speed. Based on the idea of LSV method this article calculate an index to measure the monthly herding behavior of margin market. After yearly adjustment this article examines the relationship between margin herd behavior and stock pricing efficiency by unbalanced panel data. The empirical results show that the herd behavior of financing transactions did not have an obvious affect on the volatility and synchronicity, but reduce the response speed of stock price. The herd behavior of margin market reduces the synchronicity of stock, while not play a significant role to stock volatility and speed of reaction to information. This means that trader of marg-in trade based on the real herd behavior lacking of rationality hinder timely response to effective information and decline the efficiency of stock pricing. However the herd behavior of margin trade based on information is consistent reaction which based on t-he same private information but not blindly following leading to the rise of stock pric-ing efficiency. In order to realize the positive effects of margin market, this article also provides related advice for management. It has a guiding significance to improve the margin market and promote stable development of the stock market.