An analysis of herd behavior in China's securities investment fund

With the development of economy, the proportion of securities investment funds in China is increasing, and more and more retail and institutional investors are involved in it. Therefore, it is very necessary to study the investment behavior of securities investment funds. In this paper, we use LSV model to analyze herding behavior in securities investment funds, and explore the causes and Countermeasures of herding behavior in China, so as to provide investors and financial regulators with their own views on herding behavior. 1. The background and the present situation In recent years, China's financial market has been more and more perfect, attracting a large number of retail investors and institutions. By the end of November 2016, there were 2,722 mutual funds in China, up 43.49% from the end of 2014.there were 108 domestic fund management companies. In November 2016, the total size of the bond fund increased by 91 billion 981 million yuan, up to 7.03%. All these data show that the scale of China's securities investment fund is expanding year by year. But with the addition of large institutional investors, China's financial market has not become more stable, let us rethink the stock market crash of 2015, except the relevant policy factors, the herd effect also has an inevitable responsibility in this process. We can see that the fund investment strategy is more and more similar, different investment styles tend to be consistent, even in the choose a hobby and shareholding, etc., also more and more similar, these performance reflects the significant of securities investment fund in our country were herd behavior. 2. Literature review Keynes (1936) first proposed the "herd behavior", namely the famous "beauty theory". Then Avery and Zemsky (1998) defined herd behavior as a market trend that allowed private information to be followed by investors who opposed it [1]. Scharfstcin and Jeremy (1990) think when most fund managers don't know their own ability, will ignore their mastery of the private information, copy other fund managers' investment decision to prove their abilities, so the herd behavior [2]. Roll (1992) and Brennan (1993) based on the viewpoint of remuneration explain why the emergence of herd behavior [3]. Liang lu (2012) believed that fund managers lacked effective incentive and restraint mechanism, the information source of fund companies was highly similar, and information asymmetry was the cause of the formation of herd behavior in China [4]. Shen junjie (2009) concluded that the fund's herd behavior is negatively correlated with fund performance through empirical analysis [5]. Zhang yanliang et al (2013) believed that The herd effect deviates from the value investment idea and has a great influence on the volatility of the stock market [6]. 3.Empirical research on herd behavior of securities investment funds in China 3.1 Selection of empirical research model of herd behavior This paper adopts the revised LSV method of wermers (1999) to test the herd behavior of 4th International Conference on Education Technology, Management and Humanities Science (ETMHS 2018) Copyright © 2018, the Authors. Published by Atlantis Press. This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/). Advances in Social Science, Education and Humanities Research, volume 194