The herd effect of retail investors in financial market

Absztrakt (kivonat)

This thesis mainly talks about the following questions: What is the herd effect? What is the history of theoretical development of herd effect? Whether there is herd behavior in the selected area (China)? And the herd effect in the Chinese stock market is analyzed by using CSAD model. Herd effect theory belongs to behavioral finance. It is a kind of effect caused by investors' behavior bias, which has a great influence on the stock market. This thesis discusses the herd effects in financial markets. The first is the cause of the herd effect. Herd behavior is caused by the following factors, such as the following behavior of investors, the reputation of investment managers, the investment returns of investors, imitation contagion and the transmission of information. Then it discusses the influencing factors, for example market trends, individual stock return and circulating share capital size. Last it discusses the harm of the herd effect, it can exacerbate price volatility in the financial market, it is not conducive to the effective allocation of financial market resources and it disrupts the allocation of funds in the financial market. In the theoretical part, some models of herding effect are introduced, and the LSV, CSSD and CSAD models are briefly analyzed. By comparison, the CSAD model overcomes the problem of low sensitivity of CSSD model and improves the trading volume of LSV model. As the Chinese stock market cannot fully satisfy the CAPM rational model, the polynomial regression equation of the CSAD model is adopted. In the final calculation result, when β1 and β2 are negative at the same time, it indicates that the market has a very significant herd effect. The selected stocks are from all the A-shares of the Wind database, which from January 4, 2013 to January 27, 2016. In the selected three years, they are divided into three stages. The first Phase is that adjustment period and the transition period between bull and bear market. Phase two is about bull market (rising stage) and bear market (falling stage). And the last phase is related to those two rising stages and two falling stages. First is to calculate the CSAD value of the three stages (the calculation software is STATA), and analyze the market return and volatility of each stage. Next, calculate the regression model of CSAD. According to the calculation, no herd behavior existed in the adjustment period and ascent stage (bull market), however, the significant herd behavior appeared the declining stage (bear market) (2015/6/15 to 2016/1/27). In further subdivision, the first phase of the descent (6/15 to 8/26, 2015) showed significant herding behavior. Through the research results, we can discover that the herd effect is significant in the bear markets of Chinese stock market, and it is not obvious in other stages. After getting the results, the fifth part starts from the three dimensions of investors, exchanges and government, and gives some suggestions on the herding behavior in China's financial market. In the summary part, the calculation results of the CSAD model are summarized again. China's A-stock market is in a bear market stage and there is an obvious herd effect, which shows that investors' psychology is "more afraid of loss", so they will follow other investors and show herd behavior. Herd behavior from the aspects of psychology, is unable to completely eliminate. The healthy development of the market requires a lot of efforts, in order to reduce the herd effect, government should encourage citizens to more contact with financial related knowledge, be more confident to own personal decision, and efforts to build can obtain more transparent message data will better help weaken the herding effect on the impact of the country's economy.