Research On Herd Behavior In China Growth Enterprises Market Based On CCK Model

Herd behavior presents a concern to regulatory authority as such behavior may aggravate volatility of returns,and weaken the stability of financial markets.During 2015,when extreme market occurred in Chinese stock market,potential herd behavior might aggravate volatility of returns.literature provides evidences that herd behavior is stronger when volatility of market return is high,also in the emerging markets.As an important supplement to the motherboard market,the majority of stocks in GEM are growth stocks.And GEM set up in a short time.It is meaningful to examine the presence of herd formation in GEM.This paper examine the herd behavior in Chinese GEM according to the positive correlation between cross-sectional absolute deviation and market returns.The research of how herd behavior depend on market environment,company characteristics,industry is the focus.And we also focus on the cross-market herd behavior.Finally,we study the pattern of herd behavior as time goes on using change point model.We find evidence of herding within Chinese GEM.Such behavior is a very short-lived phenomenon.Some asymmetric effects on herding are found.The evidence shows that for the GEM,the herding reaction is stronger when the market is characterized by lower trading volume,and is more volatile.Herding tends to be more prevalent with small stocks,low long-term yield stocks and stocks that have low turnover rate.In addition,we demonstrate strong evidence of industry herding except public utilities.The herding in GEM is more prevalent than that in A-share markets.And A-share markets have a certain impact on herding in GEM one-sidedly.Using change points model,evidence of herding within GEM is only found in recently because of extreme market.These results are important for regulatory authorities to prevent and suppress herd behavior.It is also meaningful to investor.