Research On The Relationship Between Institutional Shareholdings And Stock Price Volatility

At the beginning of the development of our capital market, personal investors accounted for a large proportion. With the perfection of the system and the development of our capital market, institutional investors, who take an important part on our capital market, become stronger and stronger. There are many researches on the relationship between institutional shareholdings and stock price volatility, some of the researchers thought institutional investors aggravate stock price volatility, some of them came up with the opposite view, and others thought that institutional investors had no effect on stock price volatility. Generally speaking, there are no accordance on this problem.This paper makes normative research and empirical study together in order to clarify the relationship between institutional shareholdings and stock price volatility more forcibly. The first part states the research background and research significance, summarizes the research results of the former and comes up with the research ideal of this paper. The second part defines the concept of institutional investors and states the relationship between institutional shareholdings and stock price volatility with three theories of Property Rights Theory, Signal Theory and Asymmetric Information Theory. The third part states the mechanism of institutional shareholdings influencing stock price volatility, and puts up with research hypothesis. The forth part gives the research models and takes empirical tests with data from security market. With empirical study, we find that both institutional shareholdings and the changes of institutional shareholdings have notable positive correlation with stock price volatility. At the same time, this paper finds that different kinds of institutional investors have different effects on stock price volatility. The funds intensify stock price volatility, the brokers make stock price volatility stable, and the private equity funds have no significant effect on stock price volatility. The fifth part gives some advice on the development of institutional investors and the effective impact of institutional investors on security market. The sixth part summarizes the research result and comes up with the research prospect.This paper makes theoretical analysis firstly, and comes up with research hypothesis, which believes that institutional shareholdings have influence on stock price volatility. By empirical study we find that the more shares the institutional investor hold, the violently the stock price changes. From the empirical result we should pay more attention to the important role of institutional investors and take reasonable and effective measures to develop institutional investors so that institutional investors will play a better role on security market.