Research On Impact Mechanism Of Open-end Fund To The Stock Market Volatility

As the biggest institutional investor, the open-end fund plays an important role in Chinese stock market. However, some problems of open-end fund, such as big-share redemption, herding, frequently operating and so on, have seriously affected the stock market volatility. Therefore, beginning with the contract nature of open-end fund, this thesis makes a theoretical deduction and carries on an empirical research on the impact of open-end fund on the stock market volatility. Then some countermeasures for lessening open-end fund's negative effects on the stock market volatility are put forward. The main conclusions are as follows:Firstly, it systematically analyzes the contract nature among the essential elements of open-end fund. The open-end fund is thought as a big system composed of internal and external elements. The contract nature between fund sponsor and the government is the approval-application relationship based on information, the relationship between fund holders and fund company is principal-agent based on trust, the relationship between fund manager and fund company is employment and principal-gent based on incentives and constraint, and the one between fund trustee and fund company is custody more than supervision because of interest-driving.Second, the empirical study of open-end fund's investment characteristics is made. The result shows that the share allocation ratio of open-end fund reaches 60%, debt ratio is 30% and the stock and bond ratio appears a trend in the shift. The top three in the industry allocation of open-end fund separately is manufacturing, finance and insurance, machinery and equipment instrumentation industry as well. Owing to the state's controlling real asset price, open-end funds are fading out the financial, and real estate. The huge-share dispersibility index of open-end fund is decreasing year by year and the minimum is up to 0.106, which indicates that the huge-share of open-end fund is relatively concentrated.Third, with the application of GARCH(1,1) model, the thesis makes an empirical study about the negative effect of launching open-end fund to the stock market volatility. Through comparative analysis about the volatility trend of Shanghai composite index and Shenzhen component index, and by the empirical test about the structural changes of the volatility characteristics of Shanghai composite index and Shenzhen component index, it concludes that along with the operation of open-end fund, the volatility of both Shanghai and Shenzhen stock market has appeared to increase, the sustained parameters also increase while the smooth process decreases. This proves that the open-end fund has exacerbated the volatility of Chinese stock market, that is to say, there is a serious deviation between the actual operation of open-end fund and the government's introducing it to stabilize the stock market.Fourth, it carries a theoretical analysis on the impact mechanism of open-end fund internal elements and external factors on the stock market volatility. Based on open-end fund's increasing stock market volatility, it analyzes the impact mechanism of the capital flow, herd behavior, share-holding behavior, redemption of the open-end fund and the external environmental factors on the stock market volatility. Meanwhile, the "death spiral" evolution model between fund redemption and the stock market volatility is put forward.Fifth, a multiple regression model is constructed for the empirical study about the effect mechanism of elements and external environmental factors of open-end fund on the stock market volatility. Through the design of proxy indicators and the multiple regression model, it makes a conclusion that the fund flow change rate of open-end fund into the stock market, the net redemption rate and the herd behavior degree all bring significant positive effect on the stock market volatility of Shanghai and Shenzhen stock market volatility, the effect of external environmental factors on the Shanghai and Shenzhen stock market volatility is less significantly positive, while the share-holding concentration of open-end fund makes least significantly positive contribution to Shanghai and Shenzhen stock market volatility.Finally, some countermeasures are put forward to decrease the negative effect of open-end fund on the stock market volatility. Based on its contract nature, the open-end fund's market dominant position should be cleared. In the mean time, the enterprise-wide risk early-warning system for open-end fund should also be established and implemented. What's more, fund-investor counseling around psychological control, awareness and knowledge should be carried out by multi-locus as well, so as to restrain the negative effect of open-end fund on the stock market volatility.