Research On Stock Market Cycle And The Existence And Difference Of Herd Behavior In Chinese Stock Market

As a special form of irrational behavior, Herd behavior remains one of the important topics in behavioral finance. The herding behavior of the stock market mainly manifests as investment convergence behavior of investors deviating from fundamental analysis, invesors blindly following the trend of buying stock others rushed to buy rather than undervalued stock, selling the same stock rather than overvalued stock. Herd behavior in the stock market affects the psychological expectations of market participants, thus affecting the trading direction and market price changes of themselves and even the whole market.The traditional research on the herd behavior of stock market mostly use statistical or econometric methods to empirical test whether herd effect exists in sample data during the observation period, but hardly studys on the performance and causes of herd behavior differences in stock market under different market conditions.Taking SSE 50 Index stocks, CSI 300 index stocks and CSI 500 index stocks as samples which respectively reflect different styles of stock, and based on the theoretical analysis of the causes of herd behavior differences in stock market, the paper adopts CCK model to test whether herd effect exists in sample data during the observation period, and then explores the differences of herd behavior by packet classification of empirical research, which include differences in investment industry and differences between institutional investors and individual investors in the rising and falling market.Finally, according to the test results, we provide policy recommendations and reference for the government departments and financial institutions to formulate policies in different stock market cycle to ease the impact of herding behavior on the financial market.Obvious herding effect is detected both in the rising stage and falling stage of Chinese stock market. In different stock market cycle, including a bull market stage and the downstream stage of stock market when trading is not active, investors' preference for investment industry will change accordingly, which mainly reflects on the preference and choice of cyclical industries and non cyclical industries. Meanwhile, there are differences between institutional investors and individual investors under the same market condition, namely the herding behavior of institutional investors is obviously influenced by the bearl market than by the bull market while individual investors are the opposite; for a certain type of investors, the herd behavior under different market condition is different, namely in comparison with institutional investors, individual investors are more affected by the bull market.