| Originated from 1840 s, the securities investment funds expanded quickly on a global scale after one hundred years development. Since then, individual investors can obtain excess returns from capital market and overseas market as well as institutional investors. Started from 1990 s, the market size and influence of Chinese fund industry get a constantly reinforcement. A total of 95 fund management companies had been set up by the end of 2014, which totally issued 1893 securities investment funds and 4.2 trillion fund units. There are a total of 1094 open-end stock funds, which include 697 equity funds and 397 hybrid funds. International evidence shows that the process of capital market improvement is also along with the proportion change from individual market to institutional market. Therefore, the influence of institutional investors in the capital market will get a significantly improvement in the future.In classic theories, the rational arbitrage behavior of institutional investors would lead the stock prices back to expected equilibrium level and ensure a healthy and steady development of the capital market. However, the relevant behavior finance theories and subsequent numerous empirical evidences indicate that, the securities investment funds are not completely rational investors. In general, the irrational investment behaviors can result in abnormal market fluctuations. After a review of history, it is not hard to find irrational behaviors of institutional investors among several worldwide economic and financial crisis. The United States subprime crisis in 2007 triggered global financial crisis and put forward a series of questions about institutional investors’ market stability function. These questions focus on the following aspects: What kind of role was played by the institutional investors in the capital market boom and collapse process? Was this kind of market impact derived from the active investment behavior or other reasons? How should we guide institutional investors to be rational investors and increase the market effectiveness? For China, our securities funds are in the process of constant development, an objective answer to upper questions is vital to establish an effective market and reasonable supervision mechanism. In addition, it is also very important to protect the individual investors’ benefits. Therefore, this paper has important theoretical and practical significance.Foreign scholars’ research on institutional investors began to expand since 1990 s. The discussion mainly focused on the difference between actual investment style and the fund placement prospectuses. In addition, they also conducted research on herding behavior, momentum and reversal investment behavior and funds market impact. In our country, relative research just focused on closed-end funds before 2005 by the constraint of data consistency and availability. As equity fund scale expanding, studies gradually focused on the open-end equity funds after the reform of shareholder structure in listed companies. By sorting literature, we believe that the related research have been relatively mature. However, the lack of correlation between literatures is the main problem of these papers. In addition, almost all the literature studies only stay vision at the industry perspective and did not conduct further discussion. The author believes that if we can combine the investment style, investment behavior and market effect together rationally, the research will reach to a deeper level, the results will be more reasonable and accurate, the policy recommendations will also be stronger than before.In terms of research design, portfolio selection theory, efficient market hypothesis and behavioral finance can be together seemed as the theoretical foundation of this article. According to risk appetite and cognition difference of market efficiency, this paper classified 597 open-end equity funds in China. Through the revised model, it discussed the differences about herding behavior, momentum and reversal investment behavior between funds. By using these analysis results, we put forward suggestions to investors and regulators, etc. In terms of data selection, we identified the classification of fund by using funds’ investment portfolio and seven benchmark indexes data, and then we studied the difference between funds in herding behavior, momentum and reversal investment behavior. Moreover, we analyzed the difference between funds through fund shares data, average turnover rate data and the p/e ratio data; Finally, the paper analyzed the different market impacts between funds through fund net asset value data and average market return rate.The main conclusions and points of the article are as follows: Firstly, the risk preference of institutional investors and the cognitive differences of market efficiency can lead institutional investors to the different portfolios. Secondly, different funds choose to act differently, embodied in herding behavior, momentum and reversal investment behavior, etc. Thirdly, the passive funds increased market fluctuations; the active funds ensured the market stability. Finally, equity funds product design problem is also one of the reasons for market irrational fluctuation.Based on the theoretical and empirical analysis, the policy suggestions focus on the following fronts: Firstly, full information disclosure and diverse financial instruments will improve the effectiveness of capital market. Secondly, the government should guide investor sentiment correctly by introducing behavior financial regulatory model. Thirdly, the structure distribution proportion should be optimized to enhance the institutional investors’ market stability function. Last but not least, we should increase investor education gradually and guide fund holders to form correct investment philosophy.The main innovations of this article are as follows: Firstly, we used equity funds’ risk preference and cognition differences in market efficiency to be the main classification standard between funds, and then conducted relative empirical research about institutional behavior and its market impact. Secondly, after classification, every fund type included many separate funds, so we could ignore single fund’s duration problem and conduct integrity market cycle analysis. Thirdly, this paper revised the herd behavior measurement model, which made the results more comparable. Fourthly, we used standard finance and behavioral finance theory together to discuss the differences between funds.
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