The Research On Hong Kong Investors' Herding And Home Bias Behaviors Based On The Background Of Shanghai-hong Kong Stock Connect Program

As a major part of behavioral finance,the Herding Behavior and Home Bias in stock market are becoming more attractive to studies around the world than ever,because they have a prolong effect on the stability and variety of the securities business.Since little of the study was on focusing on specific off-shore investors,especially on the ones under Shanghai Stock Connect.The paper will delve into the Herding Behaviors and Home Bias of Hong Kong investors of Shanghai-Hong Kong Stock Connect Program in the forefront.It comes first to illustrate the basic principle and model of Herding Behavior when we are dealing with the Herding Behavior of HK investors.This paper introduce a method which was based on the commonly used CSSD model and improved it,along with the relevant data given by the Shanghai Stock Exchange,to measure the extent of the Herding Behavior of HK investors.With the heterogeneity analysis,we discover that the HK investors have a notable Herding Behavior in investing under Shanghai Stock Connect,especially when the market was on an upraise course with a big fluctuation.The most notable Herding Behavior happens when the stock of the public industry and the second and fifth level companies in Shanghai Stock Connect is on a fluctuating upraising.And the more the volume of exchange in Shanghai Stock Connect,the less the Herding Behavior.Compared to the Herding Behaviors exhibit by the mainland investors in Hong Kong Stock Connect,HK investors show more sign of Herding Behavior.Finally,we analyze the possibility of whether the HK investors imitate the way of investment of mainlanders,it turns out that they do so in a short amount of time of what mainlanders did last trading day.In the study of Home Bias of Hong Kong investors,this paper first illustrates the basic principle of Home Bias.Then it compares the Home Bias of both HK investors and mainland investors in Shanghai Stock Connect.And it utilizes the difference method of HBI to measure the Home Bias of HK investors.It shows that in recent decade the HBI stabilized in a zone ranging from 74%to 77%,which means a high level of Home Bias.In order to figure out the why the HBI of HK investors stands still high with a high degree of freedom market which leads to a low cost of cross-border transaction,this paper makes a thoroughly theoretical analyze.It turns out,though the cost of cross border transaction lowers,the increasing similarity of the two markets amplifies the two offshore disadvantages,which counteract the low cost of cross border transaction,and the limitation of the investment quota set by the mainland department further increase the Home Bias,which leads to a still high level.In the end,with the empirical analysis,the paper gives some practical advices on lowering the Herding Behavior and Home Bias.