Based On Evolutionary Game Of Herd Behavior Of Individual Investors In The Stock Market

Classical finance theory is the premise of a rational man, but over time, a large number of financial vision and financial studies have confirmed that there are a lot of irrational behavior on the market, before the theory can not explain. So behavioral finance emerged, and the study of herd behavior is one of them. Stock market herd behavior refers to large investors when making decisions to ignore their own ideas, but to believe that other people choose to make decisions. As a result, the stock market will be a lot of investors to make the same choice, which will result in volatility in the stock market.Herd behavior is one of the stock market, a common phenomenon, can cause abnormal stock price diffusion, error messages, and so blind chase sell, the worst case would disrupt the order of the entire financial market. Our stock market started late, the development time is not long, and the dominant position of individual investors, more prone to herd behavior. Because a single individual investors for the entire stock market, insignificant, they are limited in all aspects of the condition, it is difficult to obtain the latest information and make the right judgments. In addition, institutional investors due to the pressure of performance and personal income, and sometimes have to refer to other institutional investors behavior. This has resulted in a large number of individual investors to give up their own ideas away choose to believe the so-called expert advice, or around people decisions. Such behavior will follow the trend of the stock market, sharp fluctuations, the stock price will be miscalculation occurred.Because of individual investors in the stock market is not fully rational, so this choice is limited rational framework of Evolutionary Game Theory to explain herd behavior in stock markets exist. Bounded rationality means that the market participants in the beginning and does not find the optimal investment strategy will continue to learn in the course of the game, you must go to seek a better strategy through trial and error, repeat this process, the final You will find a stable policy. Individual investors in the stock market are not isolated, they also occur in conjunction with the contact between investors around, constantly learning from each other, trying to find the optimal investment strategy. This article will be divided into rational investors trading strategy trading strategy trading strategy and noise, the use of evolutionary game theory methods of analysis, concluded: Investors within the same group to take the same investment strategy, exhibit herd behavior; different groups of individuals investors herd behavior among populations do not produce, generate herd behavior within groups.Finally, by observing the ups and downs of health 2015 A shares, the stock market has come to a very serious herd behavior, and evolutionary game model based on fast learning explains the fuse mechanism does not work reasons. Since herd behavior can cause abnormal fluctuations in the stock price, the paper puts forward some preventive measures, and from a different perspective on market participants put forward different proposals. To minimize the incidence of herding, maintain the stability of the stock market, first of all should be in a more sound investment environment, including improving the relevant legal and regulatory mechanisms to increase options and futures trading warrants; second is to increase the quality the number of listed companies, the number of listed companies so that investors can not find the lack of suitable investment objects had to take speculation; Finally, institutional investors play a greater role in raising the proportion of institutional investors to maintain stock market stability essential.