Study On Impact Of Open-ended Equity Funds To The Stability Of Chinese Stock Market

China’s stock market was founded 20 years ago, as its rapid development it’s playing a very important role in national economic development. Because it’s a new market, it still has some problems. The stock market has too much individual investor, which is thought the main reason for the severe fluctuation. The management wants to stabilize the stock market and improve the investor structure, so they proposed a strategy that promotes the institutional investors positively. The open-ended equity fund is the most ratios in the stock market, and it invests most of its money on the stocks, so its investment behavior will have a strong influence on the stock market. As a result, we research its influence on the stock market, and we can research if it has the effect just as the expected of management.This paper use the method of theoretical and empirical analysis, to research the relationship between open-end equity fund and stock market’s stability. On the theory study, we state its development situation and exists the problems, and explain the theory about the market’s stability, and then we summed up this funds’ positive and negative effects on the stock market. On the empirical analysis, we combine the development of this fund with the actual situation of our stock market, and we divide the time from 2003 to 2014 into three periods. Firstly, we use some descriptive analysis, and then using the GARCH(1,1) model to compare the different stability characteristics in three different periods. The empirical shows that in the beginning stage of the development, it has some negative effect to the stability of the stock market. In its golden development stage, it increased the stability of the stock market to some degree, and this time the stock market was a bull market. After the financial crisis, the impact on the stability has decreased, but it still didn’t have a role in stabilizing the stock market. Overall, the development of the open-ended equity funds didn’t play apparent role in stabilizing the stock market, but make the stock market become more fluctuant. At last, we use the VAR model research the relationship between the stock market and the open-end equity fund market, anglicizing the different effect process and degree. The empirical results show that for the yield of stock market, when the stock market in a bull market, the effect by the fund market yield is the largest, the second is the bear market, and the weakest is the period of shocks.At last, we combine the empirical research results of this paper, giving constructive suggestions about open-end equity funds how to better play the role of stabilizing the stock market. And contribute the positive exploration to the stock market’s more healthy development.