Study On Stock Holding Preference Of Different Types Of Institutional Investors And Its Effects On Stock Price Volatility

CSRC officially opproved two closed-end fund in March1998. Regulators began topay attention to the function of institutional investors and introduced institutional investorsto stock market designedly. After joining WTO, the function of stock market in China’snational economy apparent increasingly day by day with the gradual opening up ofChina’s economic and financial market. Under this macroscopic background, regulatersbegan to develop and support the development of institutional investors from the policylevel. And then our stock market developed to an institutional investors system includingsecurities investment fund, QFII, insurance companies and pension funds and so on. Thetotal size of institutional investors also became unprecedented strong. However,compared with foreign mature markets, China’s institutional investors have many defectsowing to the short development. Different types of institutional investors enter the stockmarket in different time and have different investment philosophy and investment stategy.so they may have different investment preference and different impact on the volatility ofstock price. The purpose of this thesis is to analyse whether there is difference ininvestment preference and impact on the volatility of stock price between different types ofinstitutional investors. And then we will analyse the reasons of the differences and putforward relevant policy recommendations.This thesis investigates the differences in investment preference between SecuritiesInvestment Fund, QFII, Insurance Companies and Pension Funds based on dynamic paneldata. The results show that different types of institutional investors have differentreference index and have different reference standards though to the same reference index.So there are differences in investment preference. This thesis also analyzes four types ofinstitutional investors’stock holding effects on stock price volatility based on panel dataand cross-section data respectively. The results show that, the degree of effects of differenttypes of institutional investors on stock market volatility is different. In addition to thesocial security fund, the other three all will increase the volatility of the stock market when they increased holdings. And the negative influence of social security fund on stockprice volatility is very little. Overall, institutional investors do not reduce the volatility ofthe stock market.