Study Of Influence On The Stock Market Volatility By Securities Investment Funds

The history of funds industry in our country is a relatively short time, but its development is very rapid. The stock market volatility reflects the size of the stock market the dynamic risk, not only affects the investors of income, and market stability is also the premise of healthy development of the stock market. The main investment object of fund is stock, and the problem about whether the securities investment funds can reduce market fluctuations and have an effect on stabilizing market has been a focus of the academic debate. Previous studies focus on fund investment behavior too much like herd effect or fund investment characteristic. This paper starts with the history of the development of China’s fund, and analyzes China’s funds impact on the stock market volatility, mainly from two aspects including investment behavior of China’s securities investment funds and the investment characteristics.This paper chooses data of fund trading and stock prices from2006to2011as the study sample, and uses mathematical models to verify and measure fund investment behavior, in which we use LSV model to verify the herding behavior and excess demand quantity ratio method to measure feedback trading strategies. The results show that herd behavior and positive feedback trading exist in China’s funds investment. After analyzing the effect on stock market volatility by funds investment through combining herd behavior and feedback trading strategies with the fund’s holdings, we draw a conclusion that the herd behavior, the fund’s holdings as well as external factors have played important impacts on the stock market stability. Specifically, herd behavior exacerbates the volatility of the stock, and the smaller the fund’s holdings are, the higher the stock market volatility is. Besides, external factors also have a definite impact on the stock market volatility. Accordingly this paper proposes to make the stabilization function of the market fund back, that is, our country should actively explore fund investment scope and fund capital source. Besides, we should widen the channels of sales and strengthen the construction of legal market. Lastly, developing investment management consciousness of public is necessary.