Research On The Influence Of Chinese Securities Investment Fund On The Securities Market's Stability

For a long time, the structure of investors dominated by individual investors hasalways been regarded as the main reason for the extreme fluctuations of China stockmarket. In this background, to develop Chinese Institutional Investors vigorously is toexert its function in order to stabilize the market. The Securities Investment Fund(SIF)as the most imponant institutionaI investor in Chlna, has become a force to be reckonedwith in the securities market, and has a profound impact on Chinese securities market.The development of SIF has enriched the investment products, optimized investorstructure and advocated rational investment. However, due to the extemal environrnentrestrictions of Chinese securities market and defects of SIF, the invesnnent behavior ofSIF also has a passive effect on the securities market. Now to study on the influence ofSIF's investment behavior impacting on the securities market, there are two views, one"help to stabilize the securities market"and the other is"increace the securitiesmarket's fluctuation". Therefore, researching on the Influence of Chinese SecuritiesInvestment Fund on the securities market's stability have great theoretical and practicalsignificance to optimize the SIF and the investment environment of securities market.This paper researched the characteristic of SIF investment behavior and theinfluence of SIF investment behavior on the market's stability. By using the date ofSIF's ten most important stock from quarter l of 2007 to quarter 4 of 2009, the analysisconclusion is: there exist obvious positive feedback trading strategy effect and herdbehavior on stock market, and the degree of sale herd behavior is stronger than buy herdbehavior. Analyse the relation of positive feedback trading strategy effect and thefluctuations of stock market, the relation of herd behavior and fluctuations of stockmarket respectively. We could know Chinese SIF can't stabilize the securities marke.The positive feedback trading strategy effect and herd behavior of Institutional Investorsexacerbate market volatility. Finally this paper brings some suggestions to improve thefunction of SIF stabilizing the securities market in three aspects. They are the perfectionof securities marke environment, the interior optimization of Institutional Investor andthe system of apprais ing funds.