The Effect Of Institutional Investor Activism To The Capital Market Efficiency

China develops the institutional investor in purpose to maintain the stock price in capital market. This article tries to provide a theoretical basis for the developing strategy on the base of economic game theory.Compared with western developed countries, The capital market in China is characterized by the price volatility. The study found that the main reason is the faulted stock market regulation system,the lackluster development of financial derivatives and the large proportion of individual investors. In this situation, our country decided to adopt the groovy development strategy of institutional investors in purpose to arouse the market's pricing mechanism, However, in the practice, the large scale of institutional investor did not stabilize capital market prices. Thus debate above the sense of groovy institutional investors'development started.The first part of this paper discusses the background and significance of research. Institutional investors on the market pricing efficiency influence how, theory and market are controversial. After the existing research results of the document summaries, outlines the international and Chinese scholars on the study of the institutional investors and the direction of results. The second part introduces the western capital market and capital market of China the development of institutional investors and the status, and analyses their economic characteristics. The third part discusses in depth the behavior characteristics of the institutional investors and the resulting impact on the capital market. The fourth part based on the game theory as the foundation, the institutional investors and individual investors the game behavior analysis. According to market information into the analysis is divided into static game of complete information and incomplete information static game with two levels. In static analysis is carried out after the introduction period, further the use of incomplete information dynamic game model to analyze the effect of institutional investors on market stability, in order to make the model more close to the real stock market. The fifth part is given from four aspects to promote institutional market stabilization policy recommendations. This paper is based on the pricing volatility which is the most important element of the capital market, analyzing the effecting path and method acted by the institutional invertors. Under the situation of China economy transformation, the external environment is faced by institutional investors during the special period of capital market and the internal problem are also the points of this paper. The conclude can provide a reference for the capital market regulation commission.