A Study On The Stability Of Chinese Security Market Influenced By Institutional Investors

Institutional investor is the product of hyperspecialized and increasingly refined social division of labor. Also, it is the logical result of specialized, systematised and socialized investment. Evenmore, it is a symbol of the maturity of the security market. Other developed capital markets'experience indicates that it is important to cultivate and expand institutional investors and make them to be the main part of the security market. For our country, as a representative of the institutional investor, securities investment fund has made a prominent progress recent years, and has had a great influence on the stability of the market. Therefore, analyzing the relation between institutional investors and the stability of the market have practical meaning for us to explore a way to maintain the healthy of both the investors and the market.However, whether institutional investors can stabilize the market or not is still an open question in academic circles. One viewpoint considers that it is not realistic to purely depend on institutional investors to maintain the market stability, because both the institutional investors themselves and the stock market have deficiencies. Another viewpoint then believes that institutional investors are much more rational and professional than individual investors, so expanding institutional investors is favorable for the stability of the market.This paper first defines the concept of security market stability and institutional investor, and then explores the investment behavior of Chinese institutional investors. By building a market structure model, this paper analyzes the impact on the stock market by institutional investors, and comes to a conclusion that institutional investors will not always stabilize the market. On the basis of theoretical analysis, this paper reviews the behavior of securities investment funds and its influence on the market stability by empirical test, which combines with the practical situation of the A share market in our country. The empirical analysis shows that, most of the time, the shareholding ratio of funds has a positive correlation to both the share price and the stock index. The results validate that, instead of stabilizing the market, funds in our country increase the fluctuation in stock and index to a certain degree. It can clearly be seen the empirical test echoes the priori conclusion in the theoretical part. After that, this paper tries to reason out why Chinese institutional investors do not fulfill the function of stabilizing the market. On one hand, there exist systematic defects in our security market. On the other hand, the imperfections of institutional investors themselves should not be ignored. Finally, this paper attempts to offer some suggestions to improve the institutional investors'behavior, and expects to do some contributions for the development of the market.