An Empirical Study On Institutional Investor’ Behavior To The Stability Of Stock Market

In major global stock markets, the trend of securities investment institution is more and more obvious. Institutional investors are developing rapidly and they have become the main force of the securities market. With the rise of Behavioral Finance and the growth of institutional investors, many scholars at home and abroad pay more and more attention on the behavior of institutional investors. But because the China’ stock market started in late of last century, the development time for the institutional investors is short. Their investment philosophy is not mature, they are not good for the market stability, also not good for the development of our stock market, and against the purpose of letting institutional investors stabilize the market.So, the paper give some subjections at last, hoping reduce the harm affect bring from the institutional investor, and promoting the market stability.This paper studied the impact of institutional investor on China’s stock market from the critical analysis and empirical testing. At the theoretical level, this paper introduced about the development and characteristics of institutional investor, and analysis the relationship between the institutional investor and the stability of stock market from "herd behavior" and "feedback strategy" and principal-agent respectively.The empirical study makes institutional holding ratio、fund index and stock price index into one framework, and through fund index, using Co-integration model and Granger causality test to examine the relationship between the stock price index and the institutional holding ratio. We can find out that the behavior of institutional investor make increased the fluctuating of the market, and harmed the market stability. So, the paper give some subjections at last, hoping reduce the harm affect bring from the institutional investor, and promoting the market stability.