Positive Research On Herd Behavior In Chinese Stock Markets

Herd behavior in stock market means that investors ignore their private information and imitate so-called authorities when making investment decisions. It leads to the unity of the investment behavior and coherence of the investment conception, which make the investors suppress their own beliefs and make their investment decisions solely basing on the collective actions of the market, even when they disagree with its predictions. When the price goes far from rational level it may increase the stock market risks and even cause the financial crisis. So, it has been an important guideline of the maturation of stock market. In this thesis we do some research as hereinafter.Firstly, we introduce the theories of herd behavior. Now the theories are focused on the mechanism of herding, Experts in different fields have different views. Economists think that imperfect information, concern for reputation, and compensation structures are most important reasons for forming herd behavior. However, irrational herding theories start with mentality of investors, pointing out the irrationalities of herd behavior.Then we recommend the empirical studies on herd behavior in stock market, there are mainly three directions: the first one is to test the herd behavior among fund managers through measuring the average tendency of a group of fund and transaction information; the second is to test the herd behavior on the whole market by using measurement of cross-sectional dispersion; the herd behavior among the stock commentators and analysts is also a category.At last, we evidence from Shanghai A share stock markets, Learning from the methods of Christie and Huang(1995), Chang, Cheng and Khorana(2000), does some empirical analysis on the herd behavior in the china's stock marker. We finally conclude that there is obvious herd behavior in china's stock market. And there is a descend trend of herd behavior in 2006, what's more, the herd behavior in the trade industry and colligate industry are more obvious than others.