The Impact Of Institutional Investors On Stock Price Synchronicity In China

Stock price synchronicity is a phenomenon of co-movement of stock price.Chinese stock market has high synchronicity, which means the firm specificinformation is not reflected well in stock price. With high synchronicity, the feedback,selection and resource allocation functions of stock price have been undermined.Institutional investors as informed investors transmit firm specific information intostock price when they trade. Therefore, institutional investors’ trading will lower thestock price synchronicity.The thesis collects data from China’s A share market and uses the R squaremethod to calculate stock price synchronicity. The results of the empirical studyillustrate that institutional investors’ trading has negative impacts on stock pricesynchronicity in China. Furthermore, the analyses of aggregation issue and robustnesstest strengthen the results. The innovations of the thesis are studying on stock pricesynchronicity from the perspective of institutional investors and using both stable anddynamic variables as the proxy variables of institutional investors’ participationdegree. At last, the thesis gives suggestions on developing institutional investors andimproving the investor structure of Chinese stock market.