Research On The Effect Of Behavior Of Open-end Fund Purchase And Redemption On The Stock Market Volatility

The development period of China’s fund industry is only just around ten years,and open-end securities investment fund board the Chinese capital market volume stage on2001.As a most representative main factor of investment,the relation of open-end funds and stock market volatility affects the vital interests of millions of investors. Stock market volatility usually means stock price fluctuates dramatically and risk is huge. This dissertation aims to identify the relationship between open-end funds and the stock market volatility. Previous study mainly focused on the overall securities investment funds, even the study object is an open-end funds, mostly considering the fund investment behavior, the proportion of the fund’s holdings, etc. unilaterally to identify the relationship with stock market volatility.This article is from the perspective of fund investors redemption behavior, combining with other irrational factors to investigate the comprehensive relationship between stock market volatility.In this paper, LSV model is used to measure herd behavior, and the results show the existence of herd behavior in open-end funds.excess demand is used to measure feedback trading strategies, results show that there is a positive feedback open-end fund trading strategies, and when you sell the stock,it becomesmore obvious; GARCH models is used to measure the volatility ofthe Shanghai Composite Index, combined with redemption behavior, herd behavior, feedback trading behavior these three investment ratio and the fund’s holdings, discussed the impact of the behavior of fund investors redemption on the stock market volatility. after passing through the stationary test data were used a regression and multiple regression methods to check the impact of open-end funds on the stock market. During the regress process, we use the Newey-west method to adjust, to avoid heteroscedasticity and autocorrelation issue. In order to ensure the empirical robustness of the results, this paper use SV-N model to reestimatevolatility on the Shanghai Composite Index, and robustness analysis of empirical results, this paper use MCMC method, firstly programm in Winbugs software,then evaluate in the SV-N model, during the MCMC estimation, this paper using Gibbs sampling method for sampling. The results show that the empirical results of this paper haves strong robustness.This article concludes that, redemption behavior of fund investors and feedback trading strategies have a significant impact on the volatility of the stock market.Through analysis of the marginal contribution rate we find redemption behavior of fund investors on the stock market volatility have greater explanatory power. This paper concludes with recommendation that to make the development of open-end fund to stabilize the stock market, China should improve the professional financial knowledge of capital market participants, cultivate rational investment philosophy, encourgemore open capital markets, broaden the investment channels of the Fund, introduce global investors and strengthen market law foundation.