The Impact Of Mutual Fund On China's Stock Markets

In the early days after the founding of the stock market of China, the market is volatile and risky because of the immature market system and theme, etc. In order to refine the capital markets, control risk and guide rational investment, managements made great efforts to predominantly develop the negotiable securities mutual fund. It is generally believed that institutional investors have relatively stronger R & D and information superiority than small investors, and they are more rational and helpful in stabilizing the market risk. Taking this point, the managements hoped to encourage institutional investors to achieve stability of the stock market. But in 2000, "Finance" magazine exposed the "Fund Muckraking", then the debate has continued on whether the fund is able to stabilize the market, and it did not draw definitive conclusions because of the different perspectives and research methods.We chose the benchmark Shanghai Composite Index and individuals stocks as research objects, and used econometric model method to analyze the relation between the negotiable securities investment fund and the stock market. Through the establishment of VEC models, we found that when the proportion of securities investment fund positions increasing, the Shanghai index is increasing. We also found when the index increasing, the Foundation select the positive feedback trading strategies. In this paper, we took individual stocks as the research object, created time varying coefficients panel data model, and analyzed the effect of Fund's equity ratio on the volatility of individual stocks. The results showed that the proportion of securities investment fund does not always promote the fluctuation of individual stocks, or the fluctuation of individual stocks affect the proportion of securities investment fund. In another word, the fund has no effect on the stability of the price of individual stock.