An Empirical Research Of The Effect Of Institutional Investors On The Stock Market Volatility

In November 2014,the total market capitalization of China stock market surpassed the Japanese stock market for the first time,becoming the second largest stock market in the world,just after the US stock market.Compared to the rising of the stock market's size,"Roller Coaster" type of China stock market is more conspicuous.2015 is destined to be an unforgettable year for China's stock market,from the bull market to the crash,this year,the trend of China stock market was just like "roller coaster",the Shanghai Composite Index fell 45% in the first quarter of June."Bubble and Crash" has become the pronoun of China stock market.And the partial structure of market investors is regarded as a major cause of stock market volatility.From the development process and experience of overseas mature stock market,institutional investors as professional market participants,with its smooth information channels,a huge scale of funds,rational and professional investment,are seen as a guide to stock market.Institutional investors can dramatically optimize the structure of investors,improve the level of corporate governance,enhance the stability of the stock market,and promote financial deepening and innovation.On the basis of drawing lessons from overseas stock market,our government has actively introduced institutional investors.Since the establishment of the first fund in 1991,China has gradually formed a diversified institutional investors development pattern,including securities investment fund,securities companies,social security funds,insurance companies,enterprises and so on.However,although the quantity,types and development scale of institutional investors had a significant improvement,China's stock market volatility is still happening sometimes and powerful.On the basis of this,it is necessary to try to find how the characteristics and behaviors of institutional investors affect the stock market volatility in theory,and try to find how institutional investors affect the stock market volatility under the current situation of China's institutional investors and the stock market in empirical research.In theory,this paper first defines the concept of institutional investors and stock market volatility on the basis of combing domestic and foreign literature.Secondly,it expounds the theory of effective market theory,behavioral finance theory,and property rights theory,and then exploresthe influence of institutional investors on stock market volatility from this effective market theory,behavioral finance theory.Thirdly,from the aspects of the basic characteristics and behavior patterns of institutional investors,this paper analyzes the positive or negative impact of institutional investors on stock market volatility.At the same time,for institutional investors are not the only reason which affects the stock market volatility,this section will analyze other factors that affect the stock market,paving the way for empirical research.At the end of the theory,the institutional investors in China will be sorted out more than 20 years of development,the major types of institutional investors in our country and its development status will be analyzed.In empirical research section,this paper will explore the impact of institutional investors on stock market volatility from the perspective of macro and micro.In the macro perspective,this paper tries to use TARCH(1,1)model to find the impact of institutional development scale(level)on stock volatility.Considering the synchronization of fund scale development with the overall development of stock,and in order to eliminate the impact of non-stock market investment part of the fund.This paper will select relative scale which partial stock funds(stock funds and mixed type fund)are relative to the A-share market as a variable.Sample period is from January 2008 to December2016.TARCH model results show:(1)the expansion of the institutional size did not play a positive role in stabilizing of the stock market,but increased the volatility of the stock market;(2)China stock market volatility has the significant asymmetry,the stock market response to good news is significantly greater than the response to bad news,it reflects the lack of investment channels in China,and low degree of information disclosure.(3)As financial globalization continues to deepen,financial linkage is increasing,the national financial market volatility is also affecting the stability of China stock market,the volatility between them have a certain degree of synchronization.In the micro research,this paper makes an empirical study on the impact of institutional holdings and its change on the volatility of stock returns in listed companies.At the same time this article will use non-parametric method to divide the period(2013Q1-2016Q3)into bull and bear market to study on the impact in the different market environment.The results show:(1)In full sample period,institutional holding is positively related to volatility of stock price return,this shows to a certain extent,China's institutional investors are not mature,irrational and non-standard investment behavior exacerbated the stock market volatility.But the changes of institutional holding is not significantly related to volatility of stock price return.(2)Under the bear and bear market,the proportion of institutional holdings and their changes have different effects on stock market volatility.In the bull market,the stock with higher shareholding ratio is lower,and the stock of the bear market has higher volatility,and the proportion of the institutional holdings in the bear market has a significant effect on the stock market volatility.At the same time,changes in the proportion of institutional holdings in the bull market will exacerbate the volatility of the stock market,while the change in the proportion of the institutions in the bear market will play a positive role in stabilizing the market,but the impact of the institutional shareholding changes on the volatility of the stock market is more significant in the bull market.From the existing research results,the sixth chapter of this article will put forward the relevant policy recommendations from strengthening the supervision,standardize the behavior of institutional investors and so on.