The Identification And Empirical Study Of Herding Behavior In Chinese Securities Funds

With the promulgation of Chinese Securities Funds Law in Octoberthe end of 2003 and the rapidly development of Chinese open-end funds,it is particularly important to focus on the investment behaviors includingherding behavior of Chinese securities funds.In this paper, we firstly do some empirical study with the investmentportfolio data of Chinese securities funds dated from 2003 to 2005, andmeasure the degree of herding behavior. Especially, we divide theherding into two types: real herding and spurious herding and we do somecomputation for them. The results show that Chinese securities funds doexist stronger herding behavior, and the contribution of spurious herdingis larger than real herding.On the other hand, according to the mechanism analysis of theformation of the herding behavior, some hypotheses are brought forward:the degree of herding probably occurs on smaller capitalization stocksrather than larger capitalization; the returns of the security will haveeffect on the buyers' ratio and the relation is positive. Then, this papertests these hypotheses. The result shows that the herding behavior inChinese funds markets is mainly caused by informational herding andinvestigative herding, while the characteristic herding based on the returnof the stock is not. In addition, with the result of the empirical study, thispaper analyses the further cause of herding, and puts forward suggestionsand solutions to restrain herding behavior.