Investors' Overconfidence,Herd Behavior And Stock Price Crash Risk

In the past 40 years since the reform and opening up,the scale of our financial market has been growing,the main body of market participation has been increasingly extensive,and the ability to serve the real economy has been continuously enhanced.At the same time,new phenomena have emerged in the course of the operation of the financial market.As an important financing channel and investment place,the stock market plummeted frequently.The study and reduction of stock price crash risk in China will protect the interests of investors.It plays an important role in promoting the steady development of the capital market.The traditional financial theory cannot explain the phenomenon of stock price collapse in the real market.In contrast,the birth and development of behavioral finance play a great role in explaining the stock price crash phenomenon in the real market.Among the existing studies that combine investor psychological bias with financial market anomalies,most of the literature deals with herding behavior bias in psychological biases,and there are also relatively few related to investors' overconfidence psychology.But from the current research,there are few literatures studying the influence of herding behavior on stock price crash risk.As to the effect of investors' overconfidence on stock price crash risk,the existing literature only uses the theoretical model to study the impact of overconfidence on another research object,and infer the effect of overconfidence on stock price crash risk,but does not study directly the effect of overconfidence on stock price crash risk.Studies about the transmission mechanism among investors' overconfidence,herding behavior and stock price crash risk have not yet appeared.Through theoretical and empirical analysis,this paper systematically analyzes the relationship between investor overconfidence and stock price crash risk from the perspective of the intermediary effect test of investors' herding behavior,and analyzes the formation mechanism of the relationship between investors' overconfidence and stock price crash risk.This paper firstly combs and summarizes the existing domestic and foreign literature,and carries out the theoretical analysis and the empirical analysis on this basis.Our empirical results show that:(1)there is a significant negative correlation between investors' overconfidence and stock price crash risk,and investors' overconfidence in the market is more likely to be a kind of ‘pseudo overconfidence',That is,investors' overconfidence in correct private information.Investors' paying more attention to correct private information will promote the reflection of information in the stock price,so that more correct information can be integrated into the stock price in time.(2)There is a significant positive correlation between the herd behavior of investors and stock price crash risk,and the herding behavior in Chinese capital market is more likely to be a ‘real herding behavior' that ignores private information,not the ‘pseudo herding behavior' due to the receipt of common information.Investors will ignore their own private information and make investment choices following other investors,causing many investors' negative information about companies not to be reflected in decision-making and pricing.With the accumulation of negative news,once released,the stock price crash would happen.(3)There is a significant negative correlation between investors' overconfidence and herd behavior.Because the motivation of investors' overconfidence is opposite to that of ‘real herd behavior',the ‘pseudo overconfidence' of investors will weaken the ‘real herding behavior' in the market,that is,there is a negative correlation between the two.(4)Investors' herd behavior plays a part of the intermediary role in the process of the influence of overconfidence on stock price crash risk.