China's Securities Investment Fund Investment Behavior Of Stock Market Volatility Study

Securities investment funds are the largest institutional investors in China's securities market and play important roles as well. Whether the Funds could stable the market and regulating the development of it is always been studied.This paper studies the object that either the securities investment funds' behavior increases the volatility of the market or increasing the stabilization of it. This empirical study has four main perspectives which including the flock of sheep behavior, feedback trading strategy, short-term investment behavior (window dressing and sprint acts) and the relevance between funds' stock holdings and market volatility.Through the perspective of the four deferent angles, the following results were obtained. First, China's securities investment funds showed a certain degree of flock of sheep behavior. But at the same time, with the scale of the development of securities markets, flock of sheep behavior reduced as well. Second, in the operation strategy, the Funds has the overall strategy of positive feedback trading. The study also show that it is more inclined to use the positive feedback trading strategy in buying which means buy more equity performing well before, and less inclined to use this strategy in selling which means not to sell the shares which performing poor before. Third, the study of funds' behavior at the end of the reporting period will conclude that whether in the window dressing or sprint acts, the overall funds cannot be obviously observed a clear sign of such behavior, but in a small number of the reporting period some those behavior still have the possibility to be observed. Fourth, in the study of relevance between Funds' stock holdings behavior and the volatility of certain stock the results shows that holding of certain stocks do not have high relationship with theirs volatility while in most quarters the Funds can play the role of stabilizing.In this paper, the results of empirical studies will be summarized as follows: First, China's securities investment funds on the stock market in general has played a stabilizing effect. We should not exaggerate its negative impact on the volatility of the market. Second, China's securities investment funds sometimes also reflect a certain degree of similarity, which could impact the volatility of the market as a whole or in part of, especially the buying behavior.This paper puts forward some policy recommendations from the empirical result from the study.