A Study Of QFII Shareholding Effect On Return Volatility Of Chinese Stock

In2003, the government of China implemented the Qualified Foreign Institutional Investor mechanism, as a transitional arrangement when the Chinese capital account is not open. So far, the Norwegian central bank, Morgan Stanley, Credit Agrigole Corporate and Investment Bank, Temasek Investment Group, Citigroup and Goldman Sachs and other258foreign institutional investors have approved to enter China’s securities market to make investment, accounting51.42billion dollar funds of investment. With the share of foreign institutional investor becoming bigger and the participation of foreign institutional investor becoming more deeply, this article’s aim is to study the foreign institutional investor’s impact on Chinese stock return’s volatility.Firstly, compared to Taiwan QFII mechanism, Chinese QFII mechanism has its own characteristics. Then, combined with the stage and problem of Chinese securities market, this paper has analyzed the positive effect conducted by QFII on Chinese stock market. Finally, using quarterly report of QFII Awkwardness to compute Foreign Institutional Investor’s shareholding, and using market capitalization, last quarter yield and return volatility on the Shanghai Composite Index as control variables, to make empirical analysis the influence of QFII investment on listed company return volatility.Through empirical analysis, considering inertia case of volatility, QFII holdings of listed companies involved will help reduce the volatility of return of listed companies, which can play an important role in forming the atmosphere of rational investment and prudent investment. QFII mechanism’s development in our country, improve the competitiveness of China’s institutional investors, will focus on dividends of listed companies, concerned about the fundamentals of listed companies information and develop the idea of rational investment. This paper propose four advices:promoting the QFII mechanism, improving the information disclosure QFII investment dynamic, actively enhance the professional quality of our institutional investors and the bonus policy of listed companies.