An Empirical Research On The Stability Of China A-Share Market Influenced By Institutional Investors

The idea of studying this theme is from the author's intern experience in a Security Company and a Private Fund during witch I was responsible to the task of researching Securities Investment Funds.Institutional Investors in China have become an important power in the securities market. But scholars have different opinions that if Institutional Investors could stabilize the market. Summarizing other scholars' research literature, this paper study the relation between Institutional Investors and the stability of A-share market from the prospects of Herding Behavior and Share Ratio. The innovative points of the paper are as follows.1,Using "Herding Behavior Degree" as the measurement of Herding Behavior and the data from 2003 Q1 to 2006Q4, the empirical result shows that Herding Behavior of Institutional Investors exists but have decreased compared with that of the average value at the first two years of A-share market's establishment.2,It creates a regression model of the impact of Institutional Investors' Herding Behavior on the stability of stock market. Taking "Herding Behavior Degree" as the measurement of Institutional Investors' Herding Behavior and creates the regression model, the empirical result explains that the impact of Institutional Investor's Herding Behavior on the stability of stock market is not evident. The reason probably is that the "Herding Behavior Degree" is not precise which needs more refinement.3,It creates a regression model of the impact of Institutional Investors' Share Ratio on the stability of share market. With the data from 2005Q1 to 2006Q4, the result demonstrates that Institutional Investors have positive impact on share market. Considering current literature have not distinguished the different impact of different sorts of Institutional Investors on A-share market, this paper use the data of share ratio of Securities Investment Funds, QFII and Social Security Funds to test the regression model. And the result shows that Institutional Investors altogether have negative correlativity with share price fluctuate, and it's also true for Securities Investors, providing evidence for Institutional Investors' function of stability on share market. But the relation between share ratio of QFII, Social Security Funds and share price fluctuate is not distinctive which explain that the scale of the two institutional investors is too small, and may not influence the market.4,It creates a regression model that verifies the negative correlativity between Institutional Investors' share ratio and turnover ratio. And provide evidence for Institutional Investors' function on the stability of A-share market.In summery, this paper investigate the impact of Institutional Investors on China A-share market from the prospects of Herding Behavior and share ratio, and get the conclusion that Institutional Investors have the function of stabilizing A-share market. Anther conclusion is that the power of Securities Investment Funds overwhelms other kind of Institutional Investors which may have negative impacts on A-share market. Therefore, studying the impact of Institutional Investors' structure on the stability of share market is necessary in the future.