The Stabilizing-market Function Of The Mutual Funds

With the adverse effection of series of "Inside Story of Funds " and the supports by behavioral finance theories which are called "Herd Behavior", "Momentum Trading Strategy", and so on, the funds' function on stabilizing-market is being misunderstood and being denied. There are also many positive conclusions on the stabilizing-market function in some literature, but they, in the theoretic view, seem not all-around. With the fact that the mutual funds are being more and more powerful in the economy, they need to be correctly understood. Therefore, titled on the stabilizing-market function, this thesis researches the theories and comes to a primary conclusion linking with China evidence.In it's theoretical part, the thesis, from two angles, discovers whether the funds have the stabilizing-market function or how can they make it. From one angle, the thesis shows that, as the practical stabilizing-market function should be the function that keeps the price being loyal to the basic value, if the funds have such functions, they must help to eliminate or reduce the interference or damage by the human factors throughout the transfer of the original value-knowledgement. Of course, this function of the funds is subject to the funds' capacity, behavior characteristics and market power. From the other angle, the thesis shows that even if the funds have the value-information superiority, the rational characteristic, and the market-power dominance, they can hardly stabilize the market, or are hardly willing to do it, because when being put into the market, their identities are relative and changing, which means that in different market with different subject-structure, the funds' motivation and influence are different, which will results in different kinds of price movements. As the supplement of the theoretical part, based on the contractual relationship, the thesis shows that the funds' characteristics are not only fixed but also changeable.In its empirical part, the thesis, firstly, using tools gotten from research, tests the characteristics of the funds' identities. The test shows that, in our country: (1) the funds' professional competence are not notable; (2) in the control of the return-ratio fluctuation, the funds have not exceeded the market, and shown lower ability of adjustment or control; (3) on the whole, the funds industry is becoming more and more competitive, rather than monopoly, simultaneously the funds are rising to be the leading force of the market. Secondly, the thesis tests the relationship between the behavior of the funds and the stability of the stock price. The test shows that, in our country: (1) under normal circumstances, the funds' achievement adjustment and the fluctuation of the stock price influence mutually, but when in the bull market, the funds, mostly, becomes the producers of the fluctuation, and when in the bear market, the behavior and the stability tend to become out of relationship; (2) whether the funds are the source of the fluctuation or the stabler of the market depends on the funds' entire share of the market, the funds' strength contrast within the funds industry, and the power balance between the funds and retail investors; (3) looked from a stoichiometric way, about 2.7% averagedly, or above 10% in some quarters, estimated conservatively, of the fluctuation of the stock price can be explained by the stock-holding behavior of the funds.According to the theories discussion and test results, the thesis finds that the funds' stabilizing function is controlled by the feature of its contract relationships and the change of market power, and that the function differs in different stage.