Research On The Chinese Stock Market Stability Based On Behavior Of Institutional Investors

After nearly two decades of development, China's stock market has made considerable progress in both quantity and size of listed companies'transactions, but it still has a large volatility with higher amplitude. The stock prices fell or rise together, which showed a greater systemic risk. The volatility of stock price is small associated with the changes of performance of listed companies, and it is mainly due to the impact of national policy.In recent years, along with the government proposed strategies of"super-normal development of institutional investors", institutional investors gradually replaced individual investors as the leading force in China's stock market. Compared with individual investors, institutional investors have obvious advantages in information development and processing, and scale of funds. According to traditional financial theory, the behavior of institutional investors is more close to"rational man"hypothesis, and the improvement of its market position will help to promote the healthy and stable development of the stock market. However, the emergence of behavioral finance have questioned that the institutional investors'performance in the stock market is not as"perfect"as traditional finance theory described. Its behavior not only failed to inhibit the excessive volatility in asset prices, but brought adversely affects to the market stability. In this case, it is very necessary to analysis how the behavior of institutional investors impact on the stock market stability and to propose measures to improve the stock market.In the specific argument, the paper does theoretical and empirical research on the relationship between institutional investors'behavior and stability of the stock market, and selects three angles to do systematic analysis of institutional investors'deviant behavior and its impact on China's stock market stability. Finally, the article analyzes the reasons of institutional investors have not yet played functions on stabilizing market and proposes some improvement countermeasures.