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Research On The Trading Behavior Of Chinese Equity Funds And Its Effects On The Stocks Yield

Posted on:2010-01-01Degree:MasterType:Thesis
Country:ChinaCandidate:Z S ShiFull Text:PDF
GTID:2189360278472958Subject:Finance
Abstract/Summary:PDF Full Text Request
With the promulgation of "Interim Measures for the Administration of Securities Investment Funds" by the State Council in November 14, 1997, securities investment funds in china has grown quickly and become the important institutional investor. They are regarded as the role of stability of market. But the constant negative press coverage of news lead to doubts about the development of the funds. Then as the institutional investor with grasping massive capital, how does it transact actually? Does its behavior give a great blow to market? On the other hand, according to behavioral finance theory, such as cognitive bias, investors are not entirely rational, but limited rational. Then as the institutional investors, the fund companies have super advantage in R&D. Therefore, do they behave entirely rationally and make reasonable income expectation of listed companies?To answer these questions, with the detailed quarterly data of stocks which were held by fund companies, this article analyzes the impact of funds' transaction behaviors on stocks return from the aspects of both herd behavior and feedback trading behavior. Herd behavior refers to the same direction of investment decisions when a group of investors invest the same securities in the same period. For the way measuring herd behavior of the funds, this paper adopts the popular LSV(1992)measure which calculates the difference between the actual proportion of the funds with the same direction of investment decisions and the proportion of the funds under the hypothesis which there is no herd behavior. With this method, this paper derives a value of 0.077 for the herd behavior of the funds in china which is higher around 0.04 than the one of foreign funds in the foreign literature. This illustrates the existence of more evident fund herding. This article divides herd behaviors into buying herd behaviors and selling herd behaviors, the impacts of which on stocks' yield respectively are studied. The conclusion demonstrates that the impact on market yield of buying herd behavior is smaller than the one of selling herd behavior. This may be due to the short-sighted behavior of funds or the deviation of expectation on gross profit margin of the listed companies. For feedback trading strategy, the paper adopts the method of second difference in stocks position per return rate of stocks. This method can avoid the disadvantage of the popular measure which can't truly demonstrate the extent of feedback trading under the occasion that there is only change in yield without change in stocks position. With this method, the results show that the funds don't have evident momentum trading strategy. In contrast, they have minor reverse trading strategy.This paper is organized as follows: first of all, describe the purpose and innovation of this paper. Then make a summary on the related theories and empirical research of investment and herding trading behavior as well as feedback trading strategy. The third part demonstrates this paper's empirical research on both herding trading behavior and feedback trading strategy as well as their impact on stocks yield. The last is the summary of related problem and policy recommendations.
Keywords/Search Tags:Herding Behavior, Feedback Trading, Momentum Trading, Gross Profit Margin, Yield
PDF Full Text Request
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