The Research On The Market Effect Of Institutional Investors’ Stocks Recommended Behavior

With the gradual improvement of the stock market, institutional investors have now developed into the main body of the capital market. As the experts in processing accounting information, institutional investors act as the medium between listed companies and investors. They can make judgments on stock value according to comprehensive accounting information of listed company, and then release recommended stock information to investors for guiding ordinary investors to invest. The scientific and objective recommended stocks information is helpful for the operation of capital market price mechanism and the realization of the function of resource distribution. While whether the recommended stock is scientific and objective or not, it should be inspected from its market effects.This article took7634pieces of recommended stocks information published on the "institutional investors’concern for the first time" a column of recommended stocks on "Securities Star" as the study objects to research the market effects of institutional investors’recommended stocks. Descriptive statistical analysis was firstly used. And the results showed that:when recommending stocks, institutional investors of our country tend to make optimistic forecasts and give positive suggestions to buy or increase the holdings etc. In addition, there were "herd behavior" when institutional investors recommend stocks, which resulted in the convergence of a large number of recommended stocks information on the market. Then, through the event study analysis, we found that:there was significant positive average abnormal return during the week that the stock was recommended and a few weeks before recommended by that institutional investors, but after the announcement of the recommendation information there was no significant average excess return or even emerge the situation of negative. It shows that institutional investors had short-sighted behaviors when recommending stocks, because the stock recommended would only get the excess rate of return in a short term. Finally, through the establishment of regression model, it was found that the excess returns at the week that recommendation information of the stocks recommended by the institutional investors was announced was related to the rating opinion made by institutional investors. As the impact-index of corporate earnings information on recommended week adjusted return, EPS of the company did not pass significance test. Based on the above conclusion research, this article put forward several corresponding recommendations to improve the market effect of institutional investors’ recommended stocks, such as strengthening the government guidance, sounding the relevant laws and regulations, reducing the information disclosure mechanism, improving institutional investors’practicing quality and so on.