An Empirical Study Of The Relation Between QFII’s Shareholding And Stock Prices Volatility

In order to attract long-term investment and use the value of the foreign institutional investors to guide our investors in China and expand the number of institutional investors in China’s stock market, Drawing on the QFII development experience of the emerging market countries, such as India, Brazil, South Korea, China Taiwan, the China Securities Regulatory Commission and the People’s Bank of China issued the Interim Measures for the Administration of Securities Investment in China by Qualified Foreign Institutional Investors to began to implement the QFII system on December1,2012. So far, QFII in China’s development has gone nearly a decade’s time, in this decade the development of which has been relatively stable. However, starting with the second quarter of2011, China’s QFII approval progress significantly accelerated and so with the approval quota. Until April3,2012, the China Securities Regulatory Commission and the People’s Bank of China jointly issued a statement; the amount increased from$30billion to$80billion, and will further accelerate the progress of QFII approval quota, which may indicate that the QFII system will enter a new stage in the development of our country.According to the latest data, as of March23,2012, the total investment quota of QFII in China was265.5billion RMB, of which the stock market value of197.9billion RMB, accounting for74.5%of the entire portfolio, accounting for our1.09%of the entire A-share market capitalization, and has become the third largest institutional investors in China’s institutional investors.With the tendency of China’s QFII development policy, as well as further liberalization of the capital market trend, QFⅡ’s influencement to our capital markets will be increasing as the approval of quota increases. In order to be able to examine the impact of QFII on China’s stock market, we will start from the microscopic perspective, to testify directly to examine the impact of QFII holdings in listed companies stock price volatility, QFII whether to play the expected role in the stability of China’s stock market, and make recommendations.This Innovation of this article may be:(1) starting from the microscopic point of view, taking into account other factors that may affect the company’s stock price volatility, the intuitive investigation on the basis of macro and micro factors that could affect the stock price volatility control, study the impact of QFII’s stake changes to the stock price volatility, compared to the previous by GARCH model through dummy variables is more intuitive and concrete.(2) On the basis of the traditional sectional regression, we build a dynamic panel data model to study the impact that the QFII’s stake change may influence the company’s stock price volatility from multiple perspectives of the overall size of the company, industry, and further analysis of the reasons that may exist.(3) We use a dynamic panel data model to investigate QFII’s preference for the company’s stock price fluctuations, and a simple analysis of the company’s share price fluctuations’influence to the QFII’s shareholdings change.In this paper, the general structure is as follows:(1)Firstly, introduces the research background, significance, methods, innovation, and insufficient;(2)Secondly, summarizes the QFII and institutional investors’impact on the stock market volatility at home and abroad;(3)Thirdly, summarizes the theoretical basis of the QFII system, including the theory of two-gap model, financial deepening theory, international capital flows theory and asset portfolio theory; then give a brief introduction to the QFII’s development in China’s from approval quota, trading volume, asset allocation in A-share market.(4) Fourthly, introduce three aspects that QFII may influence price Volatility of the listed companies in China, QFII’s herding effect, industry investment effect and market linkage effects;(5)Fifthly, Empirical research part, on the basis of the traditional sectional regression method; then introduce a dynamic variable changes in QFII stake to construct a dynamic panel data model to testify the impact of stock price volatility of QFII holdings change.(6) Finally, with the empirical results presented in this article to give some policy recommendations.Through study of relationship between the QFII holdings and stock price volatility of listed company that QFII hold at the end of every quarter during the first quarter of2009to the third quarter of2012. Generally Speaking, We found that QFII has exacerbated the fluctuations in the company’s stock price in China, and its role in stabilizing the country’s stock market is not obvious.In order to prevent QFII from generating potential adverse impact on China’s stock market, to take advantage of the mature investment philosophy, and to improve the investment philosophy of our investors, while taking advantage of the QFII the rich trading of the securities market in China. China’s policy-makers may be appropriately strengthen the QFII international regulatory cooperation; perfect of QFII information disclosure mechanism to strengthen the supervision of QFII; to enhance the overall quality of listed companies and to guide QFII to diversify their investment; strengthen our financial product innovation and richen variety of transactions on China’s securities market, to achieve a win-win situation.