An Empirical Study On The Relationship Between Funds And Stock Price Volatility In China

Based on the research method of Sias (1996) , we study the relationship between funds holding and the stock price volatility during 2003-2005 in China. Our empirical result shows: after controlling the effect of lagged return, price, size, turnover, dividend, book value to market value and listed age, the lagged funds holding has no significant effect on the stock price volatility, which meant that funds doesn't reduce the stock price volatility, but the lagged stock price volatility has significant effect on the funds holding, which means that funds have significant preference to the stock with lower price volatility. The hypothesis that funds can stabilize the stock price volatility does not hold water.