The Impact Of The Proportion Of Fund On Chinese Stock Market Volatility

The pace of development and the scale of investment of funds have been highlyconcerned Since Chinese government introduced them into the securities market in1998.They were even developing and expansing very fast during the stock market wasskyrocketing from2005to2007. The government hoped to drive the stock market todevelop healthy and stably by the professional management and rational investment offunds, but the fluctuations of the stock market became greater after the introduction offunds. It even experienced a rollercoaster spike from2005to2008which had causedpeople suspected that whether the funds can stabilize the stock market. What role thefunds played in the stock market? Whether they can stabilize the fluctuations in stockmarket or not?This paper classified stock market volatility into daily fluctuations, long-termfluctuations and short-term fluctuations according the broader market trend. Then thepaper summarized the results of previous research and noting that the existing literatureson the latter two kinds of fluctuations were few. To fill this gap, this paper will analysishow the funds impact the latter two kinds of fluctuations of the stock market. The paperdefined what was volatility based on the existing literatures and then summarized theexisting methods to measure the volatility. We proposed a new measure of volatility anddescribed the mechanism of the impact of the funds on the stock market volatility.Furthermore, The paper described the relationship between the variables by some graphsand then researched their relationship through regression analysis by Eviews6.0. Afterin-depth analysis, the paper concluded that funds exacerbated the volatility of the stockmarket in the2005-2008period, while had no influence on the stock market fluctuationsin the other three period.