An Empirical Study Of Herd Behavior In Chinese Stock Market Based On Time-varying Parameter Model

At present,China’s stock market is still developing rapidly.The regulations are not yet perfect,and the market is seriously affected by policies.Compared with other developed countries,China’s stock market anomalies are usually more significant.Herd behavior is a kind of financial anomaly,which refers to the abnormal phenomenon that investors mimic others’ investment decisions.This herd behavior is likely to aggravate market fluctuations and is not conducive to maintaining the stability of the stock market.Therefore,it is necessary to conduct research on herd behavior in China’s stock market.This paper uses TVP regression model to characterize time-varying characteristics of herd behavior in China’s stock market as a whole and by industry from 2006 to 2019,and combines fluctuation characteristics of China’s stock market to analyze the possible reasons of herd behavior.Through empirical research,it is found that:1)Herd behavior in China’s stock market shows obvious time-varying characteristics.The time interval in which there is a significant herd behavior corresponds to the period when the stock market’s price fluctuates the most.When the market fluctuates sharply,investors tend to follow suit and this herd behavior will further increase market volatility.2)There are differences in time-varying characteristics of herd behavior in different industries.These differences may be caused by industry factors that affect investors’investment psychology.This paper uses a time-varying parameter model to analyze the changing laws of the herd behavior in the overall market and different industries in China’s stock market in different periods,which shows that Chinese investors’ investment preferences for stocks in different industries will also change in the process of following suit in different periods.This can provide a new basis for empirical research on herd behavior,and provide a valuable reference for guiding investors to invest rationally and further promoting the healthy development of China’s stock market.