The Research On Herd Behavior Of Chinese Stock Market Based On Liquidity Perspective

In mid-June 2015,China's A-share market experienced a rare “stock disaster” in history.This crisis of rapid growth and rupture of the bubble indicates that there are serious irrational behaviors in China's stock market.At present,many scholars have confirmed the existence of herd behavior in China's stock market through empirical research,and compared with different markets and found that emerging markets show more than mature markets and GEM markets compared with the main board market.Severe herd behavior tendencies,mostly attributed to information asymmetry,did not delve into the impact of market characteristics on herd behavior.In fact,market characteristics differences are important reasons for the differences in herd behavior in different markets,such as liquidity,trading systems,information efficiency,and investor structure.Therefore,based on reading a large number of domestic and foreign literatures,this paper studies the relationship between herd behavior and liquidity in China's stock market from both theoretical and empirical aspects.In terms of theoretical research,this paper believes that there is a certain interaction between herd behavior and market liquidity.Liquidity mainly involves informed and uninformed transactions based on transaction costs,and affects herd behavior through information transmission.At the same time,herd behavior is often accompanied by asymmetrical order flows,which makes liquidity demand rise and liquidity supply decline,and market liquidity fluctuates.In empirical research,this paper uses the extended CCK model to find that the level of fluidity is negatively correlated with the degree of herd behavior.The lower the level of mobility,the more severe the behavior of the herd.In addition,a series of test results based on VAR model show that market liquidity has a positive impact on the dispersion of yield,and has a certain time lag effect and long-term effect,while stock yield dispersion has a temporary negative impact on market liquidity.The impact indicates that there is a certain two-way relationship between herd behavior and market liquidity.Therefore,this paper believes that China's stock market trading mech anism is not perfect,the market depth is small,and the market liquidity is poor,which is an important reason for the herd behavior.