The Research On Arbitrage Mechanism Of Institutional Investors On The Listed Open-ended Fund And Its Effect

Institutional investors have increasingly become an important force in our securities market. The system of securities market and products providing for Institutional investors is very limited. It is just because of this that the Listed Open-ended Fund came into being. The research on arbitrage mechanism of Institutional investors on the Listed Open-ended Fund and its effect has important theoretical value and practical significance.This paper will try to reveal its effect by depicting the arbitrage mechanism of Institutional investors on the Listed Open-ended Fund on the basis of theoretical analysis and empirical analysis. It draws the following conclusions:The arbitrage mechanism of Institutional investors on Listed Open-ended Fund is mainly four categories:Arbitrage for cash, Arbitrage for fund, Currency-fund arbitrage and Index fund arbitrage. It plays a decisive role in stabilizing the discount and premium of Listed Open-ended Fund. At the same time, it will also make the primary dealers sell the fund step by step and enhance the volatility of the market. In the long run, Arbitrage for fund, Currency-fund arbitrage and Index fund arbitrage can be regarded as the Listed Open-ended fund for value investment. They pay more attention to the dividend fund, but only passively waiting for dividends what are usually in the final stage of the value investment. Generally, Institutional investors prefer Buying-redemption arbitrage that reduces the total fund shares. It is likely to force the fund to liquid assets what are divided into several small pieces to sell not in one step but at a reasonable risk within expectations. This will increase the volatility of stocks and lead to the decline in the net value and income of the fund. In addition, Institutional investors seek to minimize the cost. Under the same conditions, they are more likely to buy and sell the funds rather than the purchase and redemption. It is not in one step, but step by step in batches due to the restrictions.