Empirical Research On Trading Behavior Of Institutional Investors And Market Volatility

Compare to the stock market in the United States,domestic market is more volatile,and it is generally believed that this is due to large proportion of individual investors.In order to reduce the overall volatility in stock market,governors took great efforts in developing institutional investors.And now there are various types of financial institutions participate in the stock market,fund companies,securities,insurance companies,national social securities fund,QF? and so on.The participants as well as the market size continue to expand,and institutional investors are becoming the leading force in the market.Nevertheless,stock market recurred sharp fluctuation in 2015,it is necessary to study the relation between trading behavior of institutional investors and market volatility under such circumstances.It is also of great importance to figure out if Chinese institutional investors really reduce the market volatility as governors expected.This paper studies the relation between market volatility and investors' trading behavior.The paper starts with reviewing the development history of Chinese institutional investors,and introduces five most important institutional investors in domestic market and their trading behavior.And then analyzes how institutional investors affect stock price and volatility.The last part is empirical study of Chinese stock market,the results show that institutional investors implement positive feedback trading strategy which increase the volatility.This paper analyzes different institutional investors and their impact to market,and find out that fund companies have significant influence in increasing volatility of stock price.As for securities and other institutional investors,though their trading behaviors can reduce the volatility of holding stocks,small size of these investors lead to limited impact on overall market.The empirical results show that Chinese institutional investors are not mature enough in their investment strategy,and reveal the imbalance development of different institutional investors.