Stock Price Volatility Based On Sequential Trading Model Analysis

The academia has always take a highly attention to the behavior of Securities investment fund, in this article I will study on a new perspective which analysis the investment behavior of securities investment funds by follow similar trading strategies and follow heterogeneous trading strategies. Existing literature studies mostly used Sais(2004) method to study the sequential trading models, which decomposed the cross demand correlation coefficient of stocks into implicit trading strategies (self-strategy) and herd behavior policy (follow trading strategy) two parts. In this paper, we decomposed the herd behavior strategies into follow similar trading strategies and follow heterogeneous trading strategies, then try to find the relationship between three funds decomposition factors and the stock market volatility and investigate whether the securities investment fund trading strategies could stabilize the stock market.The empirical result shows that:(1) In the cross-sectional estimates of sequentially trading models we found that open-end securities investment funds is significant in herd behavior strategies and implicit trading strategy. Investment Fund’s strategic behavior is obvious in sequential transaction or follow transactions.(2) In the decomposition of Demand intertemporal correlation coefficient, we found that herd behavior is significant in smaller and larger-scale investments, it also significant in financial and real estate stocks.(3) In the top of China’s fund management companies, investors are more inclined to take the herd behavior strategies. Fund companies based on to take herd behavior strategies; the follow similar trading strategies and follow heterogeneous trading strategies are more obvious than other strategies, and the follow heterogeneous trading strategies is the main strategy.(4) in the decomposition of price volatility and securities investment fund, we found that in several important quarter, implicit trading strategies will inhibited on stock price; while in other quarters follow similar trading strategies and follow heterogeneous trading strategies will increased stock market volatility.(5) after regression for full of sample, we found that three factors of the fund strategic trading behavior could correlate with the price of smallest, financial and commercial and bull stocks.