The Empirical Analysis Of Cross-market Herding Between A Shares And B Shares

Our securities market has developed over20years, whose role is more and moreimportant and responsibilities are increasing in the developing economic. It is directlyrelated to national economic development whether the stock market is stability or not.A-share market is the main investment targets for domestic investors, while the B-sharemarket is the main way for foreign investors to invest in China’s stocks. So the relationshipbetween these two markets directly affect the stability of China’s securities market, therebythe stability of our economy. Therefore. the study of the relationship between A shares and Bshares will have an important theoretical and practical significance.This paper studies the cross-market herding between A-share market and B-share market,including the generation mechanism and empirical research of cross-market herding. Thisarticle firstly reviews and summarizes the researches of domestic and foreign scholars in thisfield, then basing on these researches, analyzes the generation mechanism of cross-marketherding, finally, selecting2005.1.1to2012.12.31A share market and B shares markettransaction data as samples, empirically analyzes the cross-market herding between the twomarkets from various angles.The studies show that:(1)There is obvious cross-market herding between A shares andB shares, no matter in Shanghai or Shenzhen. However, the evidence of herding over weeklyand monthly time intervals is much weaker.(2)The cross-market herding is present in allfour markets examined when markets are rising, and when volume and volatility are high.The herding behavior of Shanghai A-share exhibits asymmetric tendencies, and issignificantly stronger when markets are rising, experiencing higher trading volume, andmore volatile. There is no such asymmetries for B-share investors.