Study On The Impact Of Institutional Investors On Stock Market Liquidity

Liquidity is an important indicator of the efficiency of the stock market.Adequate liquidity facilitates investors to complete purchase requests for stocks faster,and is also an important guarantee for corporate fund raisers to conduct listing financing and refinancing.It is no exaggeration to say that adequate liquidity is the basis for the trading of stocks to realize the function of financing,and not only can improve the efficiency of the stock market,but also promote the optimization and development of the entire economic system.In the classification of the Bank of International Settlements,the behavior of market participants is the basic factor affecting market liquidity.As the main body of trading in the stock market,market participants influence the liquidity through the participation behavior and the transaction behavior.Market participants provide funds for the market through trading activities and thus constitute a source of liquidity.But different market participants,such as individual investors and institutional investors,have different behavioral characteristics that will have different effects on liquidity.This article chooses the institution investors to analyze the liquidity.Because the structure of institution investors in China's stock market has undergone significant changes in recent ten years,the influence of institution investors on liquidity has still been in dispute in theorists.Through analysis of the issue,puting forward advice to improve the liquidity of the stock market and optimize the structure of institution investors.has an important guiding significance.Firstly this article reviews the development and changes of institution investors in recent years,at the same time it compares the concept and measurement methods of liquidity.At present,China's professional institutional investors hold 15.6%of the total market value of the stock market,there is still much room for development,and among the more important investment institutions are securities investment funds(including public and private equity)and insurance funds;There are four methods for liquidty:price method,transaction method,price-volume method and time method.Due to the difficulty in obtaining high-frequency data,this paper does not choose the best method—time-weighted price spread method,but the Amihud indicator which have been porved the second fittest indicator in the Chinese stock market.Secondly,the author analyzes the mechanism of the influence of institution investors on liquidity.Through the way of advantages of resources,rational investment,participation in corporate governance,and different behaviors,institutional investors have different effects on liquidity.Specifically,the concept of rational investment and participation in corporate governance can stabilize the stock market's market expectations,narrow spreads and increasing trading volume,which will have a positive effect on liquidity.The resource advantages,short-sighted behavior and herd effects all increase the bid-ask spread,reduce trading volume,and reduce stock market liquidity.Finally,the article establishes the VAR model between the shareholding of professional institutional investors and market liquidity,and verifies the impact on liquidity in different periods of the stock market.The test results show that in the long run and the downturn,professional institutional investors have contributed to the liquidity but have hindered the performance during the bull market and bear market.This shows that professional institutional investors may not be actively involved in corporate governance,and some of its behavioral characteristics,such as short-sighted and herding,reduce the liquidity of the stock market.Therefore,this paper puts forward some suggestions,such optimizing institutional investor structure,improving investment philosophy.strengthening information disclosure and improving the enthusiasm of participating in corporate governance,to improve the liquidity of the stock market.