The adversity brought about by the epidemic has caused panic among institutional investors,and the herd effect in the stock market has caused investors to scramble to flee.A surge in simultaneous buying and selling caused by institutional herding may lead asset prices to deviate from fundamentals,and the price distortions caused by this herding can magnify financial stability risks.Against this backdrop,regulators,researchers and market participants are increasingly concerned about the issue of financial risks caused by the herding effect.Are there herding effects among institutional investors when trading stocks? What factors influence this herding effect? And will this herding effect destabilize stock prices?In response to the above problems,this paper uses the data on the change in the proportion of institutional investors’ heavy holdings in the Wind database from 2011 to 2021,and first uses the LSV model to calculate the size of the herd effect in the A-share market to test whether there is a herd effect in the market.Secondly,by constructing a multiple regression model to examine the size and direction of the influencing factors of the herd effect,and finally by constructing a standard investment portfolio to study the correlation between the herd effect and the positive feedback trading strategy,and the reversal of stock prices after experiencing the herd effect degree.The main conclusions are as follows: First,there is indeed a significant herd effect in the A-share market.And as the number of institutional investors participating in transactions increases,the level of herding effect decreases.Looking at the subgroups of stocks,we find that value stocks have a higher herd effect than growth stocks;small stocks have a greater herd effect than large stocks;sellers have a higher herd effect than buyers.Second,the study found that the herd effect is related to the direction and size of the stock excess returns in the previous quarter.The higher the excess returns in the previous quarter,the higher the level of buying herds in this quarter;The higher the herd level,this proves that institutional investors implement a positive feedback trading strategy in the trading process.In addition,those who have experienced herds in the previous quarters have a positive impact on buying herds this season,but have a negative impact on selling herds;stock size,stock liquidity,and buying and selling herds are all negatively correlated;individual stock sentiment It has a positive correlation with buying herding effect,while it is negatively correlated with selling herding effect.Third,herding effect destroys the stability of stock prices.Buying and selling herd behavior can lead to temporary price distortion,and this price impact is temporary,not permanent,so the herding effect undermines the price stability of the stock.The price instability caused by this herding behavior is more pronounced in small-cap stocks and high-sentiment stocks.Based on this,the innovations of this paper mainly include the following two aspects: One is the innovation of research perspective.The existing literature in China mostly focuses on individual investors and individual types of institutional investors,such as QFII,to study whether there is a herd effect.From a broader perspective,this paper considers all institutional investors including mutual funds,brokerage firms,pension funds,trust companies and insurance companies from the perspective of institutional investors in the whole market.The most comprehensive evidence for the herding effect exists.Another aspect is the innovation of research content.First,on the basis of existing research,additional consideration of early excess returns,early herd experience,and liquidity indicators enriches the existing research results on the herd effect in my country’s market.Second,most of the existing research studies the impact of institutional herds on stock prices by constructing indicators such as stock price volatility and stock price crash risk.The impact of market stability.By constructing a standard portfolio,analyze the price dynamics around the herd to see if it destabilizes the stock price.In particular,we group the research by stock size,individual stock sentiment,which helps us better understand the impact of herding,as investor behavior may vary according to different stock characteristics,market conditions,and investor sentiment different.Therefore,we compared the effects of these factors on herding behavior and prices in a unified setting.This research is of great significance for optimizing the structure of institutional investors,reducing financial risks in my country’s capital market and promoting the stable development of the stock market. |