Microcosmic Mechanism Of Investors' Herd Behavior And Cellular Automaton Simulation

There are the heteromorphisms that contradict with the effective market hypothesis in financial market, from the way of investors' investment behavior, the important performance is"herd behavior". Herd behavior is one kind of non-rational investment behaviors, represents the transaction motive of individual investors to dodge the investment risk and chase investment benefit, displays the gambling process which the behavior strategies between investors affect and depend on each other mutually. On the surface, herd behavior as if is one very"small"concept, but in fact it the role which plays to the reality traders and the run of stock market is quite widespread.The article mainly divides into three parts to discuss the microcosmic mechanism of investors' herd behavior and cellular automaton simulation. First, has analyzed ten psychology foundations of herd behavior in stock market, including: imitation, infection, fashion, public opinion, rumor, hint, group pressure, overconfidence, overreaction and underreaction, psychological group, and so on. From the incomplete information, the reward externality and the behavior homogeneity, that carry out the economic analysis to herd behavior.Second, discussion to microcosmic mechanism of herd behavior, that uses the mutual study and imitation mechanism of evolutionary game to discuss the game process of mutual study and imitation between the rational and the non-rational investors. The analysis obtains the rules of the mutual study and imitation between the different type investors: As a result of the reward externality, the institutional investors imitate and game mutually for gaining a higher own benefits; The noise investors imitate and game mutually for the effect of non-rational psychological and saving the cost of searching and managing the information; As a result of the noise investors' possible high income, and under the influence of demonstration effect, the institutional investors also imitate and game the noise investors.Third, cellular automaton simulation to herd behavior. After introduced simply cellular automaton concept and application, construct the single stock model of cellular automaton. The model mainly aims at mutual study and imitation between the rational and the non-rational investors, and consideres the study and imitation's probability can renew with the return and the change of information impact, and so on. In the simulation resluts, we analyse the relationship about herd behavior with"leptokurtosis and heavy tails","cluster", the market stability,"leverage effect", market foam.,and so on. The conclusions indicate that:(1)The mutual imitation behavior between the market investors is the intrinsic reseason of fierce volatility in stock market, the return distribution has the characteristic of leptokurtosis and heavy tails;(2)The return has the characteristic of cluster, herd behavior enlarges the volatility, but when herd behavior starts to vanish, the probability of investors' imitation has the reverse, and the price starts to tend stable, then the volatility reduces;(3)When the institutional investors use the non-rational investment behavior and this behavior is imitated immediately by the noise investors, that can have the bad influence to the market, simultaneously herd behavior is the important factor that causes the market unstable;(4)Herd behavior is also the important factor that causes the leverage effect and market foam.In reality market, because of the incomplete information and investors'impossible rationality, herd behavior can't eliminate completely and only can weaken this kind of phenomenon through reduce the probability of mutual imitation study between the investors. Therefore, the investors should avoid the influence of the non-rational psychological factor, and enhances the ability to analyze and understand information, and can make decision independently. Herd behavior is the complex topic that the content is very widespread. This article has carried on the preliminary experimental exploration in the achievements of the predecessor. But this article still has many deficiencies that will improve and consummate in the future research.