The Empirical Evidences For Institutional Investors Influence On The Stock Variability

Since 1992, the buds of the securities investment fund in our country, the stock market volatility has been greatly increased. In order to reduce the volatility, the government have issued a series of measures to encourage the development of institutional investors since1997,who is expected to play a role in stabilizing the volatility.Starting from this stage, the influence of institutional investors has gradually appeared.However,in reality, it is debated whether institutional investors can play the role of stable volatility.In this article,institutional investors is defined as various kinds of asset management companies.They have the right to manage portfolio consist of the mutual funds, hedge funds, endowments and pension funds. Based on the Pooled least squares method,we choose the 339 A-share enterprises of Shanghai stocks market during 2007-2014 as a research sample.From the point of institutional investor holding and their change holding,this study is focused on the interaction between the institutional investors and the volatility of stock market.Obviously,it’s aim to know whether institutional investors stabilized stock market.So,we built the fixed effects regression model of panel data.In the process of modeling, we make a distinction between current impact and inter-tempora impact. It’s worth mentioning that we tried to prove the conclusion above through Sharpe ratio.this is a totally new view to research.We draw the following conclusions.Firstly,The empirical study shows the higher the shareholding of institutional investors and changes for stock,the higher of current volatility.Secondly, the higher the shareholding of institutional investors and changes for stock, the lower stock returns in the next. Thirdly, the higher the stock returns, the lower the next phase of the institutional investors holding. It is proved that institutional investors prefer stocks with lower volatility. Furthermore,ruled out the possibility that due to the high risk stock investors hold, caused fluctuations increase.Fourthly,the higher the institutional investor shareholding and changes for stock,the higher the current income of stock; and the next phase of stock revenue also increases.Showing that institutional investors could predict stock returns accurately,and increase the buying for higher returns.Fifthly,the higher the ratio of institutional investors stockholding in portfolio,the bigger the sharpe ratio in current,and the next phase of the sharpe ratio is low,which exactly proved the conclusion above.It caused the counter-cyclical of sharpe ratio.At the end of paper,according to the previous analysis, we put forward the related countermeasures suggestions.