The Theoretical And Empirical Research On The Relationship Between The Institutional Investors And The Stock Market Efficiency

The thesis reviews the development process of institutional investors in China and the related theories of stock market efficiency and its measurement methods. Based on West&Tinic’s research and theory, the stock market efficiency can be divided into external efficiency and internal efficiency, that is to say, the running efficiency and the information efficiency. Fundamental theory analysis is done about the institutional investor’s influence to China’s stock market efficiency, and it turns out that the institutional investor’s participation promotes the improvement of China’s stock market efficiency. At the same time, this paper builds two data model with market value of listed company, stock’s quarterly yield, daily yield standard deviation, and the market value of held shares’ proportion in the total market value of the listed companies. Matlab7.3&Eviews6.0are applied in analyzing the quarterly data of the top100stocks in the top100fund holdings in the period of2001to2010. And the analysis shows the proportion of fund holdings and its fluctuation affects the stock pricing efficiency of the listed company, and that the market vaule’s coefficient is negative is also found. That indicates, the larger the listed company’s market value is, the lower the stock pricing efficiency is. After controlling the effects of the listed company’s scale, fluidity and individual stock volatility, domestic funds still plays the negative role of lowering the market pricing efficiency. Both the proportion and the proportion’s increase lowers the market pricing efficiency. The specialization and information strength of the institutional investors was supposed to play a positive role in promoting the stock market efficiency. However, the fact betrays our expectation. And the cause of that is investment agency system of the institutional investors. As a investment agency system, the incentive and information incompatibility between the investor and the funds manager leads to the moral risk of the latter easily. The fund manager as the agent is more likely to pursue their own utility maximization, other than the wealth maximization of the bailer. By the end, the paper proposes the relevant policy of stock market efficiency based on the relationship between institutional investor and the stock market.