Comparison Study On Investment Behaviors Of QFII And Domestic Fund In China

To improve the internationalization and international influence of China's capital market and to cultivate the rational investment idea and to improve the use of advanced risk management skill, in 2002 China started to introduce Qualified Foreign Institutional Investors. Qualified Foreign Institutional Investors (QFII) are in line with certain conditions and the host country's approval of the relevant government departments, they can import a certain degree of foreign exchange funds, convert into local currency, and through strict supervision of the Special Account for investment in the local capital market.QFII fund has become an important part of institutional investors in the domestic capital markets. Study about the QFII's investment behavior and its impact on China's capital market is of great significance. This paper aims to compare the difference of China's QFII and domestic funds in the investment behavior (mainly investment strategy and trading strategy) and try to explain the reasons for these differences.To finish this purpose, following jobs have been done:Based on the home and abroad literature review, this article first introduces the QFII system of our country, and compares the QFII system in China with South Korea and Taiwan. The results show that the requirements of China's QFII system are much higher than South Korea and Taiwan. So that guarantees the good quality of overseas institutional investors and the stability of China's securities market.Secondly, QFII and domestic fund's investment strategy and trading strategy are compared in thia part. All the portfolio data are collected through listed companies'reports and the time is from 2005Q1 to 2008Q3 all together 15 quarters. The data of 823 listed companies is collected and pick up 17 financial indexes from every listed company. Multiple linear regression model is used to compare the preference of selecting stock between QFII and domestic fund. The results show that the domestic funds generally prefer market indicators, for example, excess return in last quarter. But QFII prefer the stock's value and the growth ability more, for example, ROE. And domestic fund is more likely to adopt momentum trading strategy.Third, QFII A share's return and domestic fund's return is compared. The results show that monthly return and latest 6 month return of QFII A share and domestic fund share is almost the same. But in the latest 1 year return, QFII Ashare is lower than domestic fund.Last, based on the above study, some suggestions about further study is brought up.