The Research On Investment Behavior Of Institutional Investors And Effects On Safty Of China Security Market

Institutional investors are a product of market competition when investment tends to be carried out through professional people and organizational coordination. It has a significant impact on transforming sporadic savings into investment; optimizing corporate governance and guaranteeing stock market perform its social function. The development of mature securities market in the world discloses a prominent trend that security investors tend to establish a legal institution. Thus, institutional investors will guide capital market investors execute long-term investment and value investment, improve market micro-structure, so as to promote safe market construction. With the great enforcement of managers, as well as the development of securities market, there is a rapid growing of institutional investors in China. It not only grows in size and scale, but also optimize in composition. As a result, securities investment funds, insurance companies, securities companies, social security fund, QFII, private equity funds etc, compose diversified institutional investors, they influence and control security market gradually.However, as an"economical person", preserving market safety would not be considered as institutional investors'operational goal. Institutional investors contribute to the prosperity of the market, while some bring negative impact on stock market. Whether institutional investors can play a positive role in persisting market safety or not becomes a common focus of investors and regulators. How to ensure fairness and efficiency, standardize institutional investors'investment behavior, promote the security market safety and protect the interests of small and medium investors has become an urgent and important issue.This paper puts great effort to derive the operational mechanism. Therefore, we carry out this study in several steps: at first, we portrait the composition of institutional investors in China security market; and then, investigate their trading behaviors. In the second, we compare the differences between institutional investors'behaviors and rational hypothesis in the first place, after those integrate macro-level factors'influence; based on this, we explore in-depth impact of institutional investors'trading behaviors on the formation mechanism of the security market. In the third, we discuss investors'protection mechanism in order to provide policy recommendations for supervising institutional investors and constructing market safety. Looking forward to leading institutional investors execute right investment direction, help individual investors to make rational decision-making, as well as provide regulatory authorities to monitor institutional investors with scientific, objective basis. These can standardize the operation of institutional investors, enhance investment value of the capital market, and promote safe and healthy development of Chinese securities market. According to this clue, this paper pays attention to four issues:â‘ characteristics of institutional investors'behavioral in Chinese stock market.â‘¡differences among different classes of institutional investors'transaction behaviors.â‘¢institutional investors'function on security market safety.â‘£how to booster protection of investors and market safety.This paper contains seven chapters. Chapter 1 presents problem statement based on the background of practical and theoretical development, defines research objectives and gives a brief description. In this chapter, research ideas and framework also been introduced. In chapter 2, we review some relevant classic theories and empirical studies on domestic and abroad stock markets; then we point out this is an inevitable process for institutional investors appearing in stock market from theoretical perspective; after this, we investigate the mechanism how institutions'investment behavior to influence market safety and clarify the importance of investor protection. Chapter III summarizes the development history of Chinese institutional investors at first, and then carries out quantitative analysis on various classes of investors'status and their investment behavior characteristics. Chapter IV, Chapter V and Chapter VI use China stock market data to study the impact of institutional investors'behavior on stock market liquidity, volatility and effectiveness from the macro-economic and micro-market structure point. Empirical studies reveal that institutional investors'action expands the market volatility and improves liquidity of the stock. But in a bull market, it can inhibit the excessive liquidity; the most important feature is that institutional investors can improve effectiveness of market significantly. This means that institutional investors have a significant influence on securities market safety in recent years. Chapter VII is an analysis of institutional investors'important role in the investor protection; based on this, some suggestions on market safety construction are given.