Open-end Fund Herding The Theoretical Research And Empirical Analysis

Mutual fund herding is a behavior that tends to follow others. It essentially describes that the strategies the investor adopt may be influenced by others, omitting his own effective and valuable information and mocking other counterparts. Herding can be expressed that many investors behave in the same way or have the same preferences.Herding is a result of a series of sequential activities. Now the theoretical research on herding is not very much in China. And most of them focus on the stock markets, not the specific markets.This article deduces two different game theory herding models based on the formation of herding and the equilibrium solution of the game theory. At last, the article constructs a binary herding model based on the information asymmetry and bounded rationality, testifying that the manager has to consider rivals' strategies so as to maximize his own utility function. Furthermore, I extend the model to n managers, finding the interior economic relationship in herding. I also find that there is a strong correlation between herding and the rewarding system.Sometimes the herding is not only related to the managers, it may also relate to the investors. So this article also analyzes the interaction effect between the investors and the managers.There are mainly four empirical analyses in herding: LSV, PCM, CH and CSAD. The article compares both the advantages and the disadvantages of these four methods and use CH and CSAD to testify the existence and the severity of the herding in the Chinese fund markets. I adopt some representative data in them, such as data coming from different types to funds, crazy surfing and downing.Finally, I get some political suggestions, containing how to pay the managers and the completeness of the fund markets.