A Research on the Herd Behavior Based on Informed Trading

This paper discussed investors’herd behavior in Chinese stock market and verified that informational cascades exist.It’s found that herd behavior of Chinese stock market in the rise stage is more obvious than downturns;the less stock value,the more obvious herd behavior,and seller’s herd behavior is more significant than the buyer’s;the lower rate of prior returns,the lower herd behavior,the higher rate of prior returns,the higher herd behavior.More importantly,there are informational cascades in Chinese stock market.The market makers play a vital role when investors follow them to make noise trading,thus results in herd behavior.