A Study Of The Effects Of The Institutional Investor's Behavior On The Stability Of The Stock Market

Since 2017,China's stock market is gradually entering an “institutional era” with the implementation of many policies such as the substantive progress of China's occupational annuity in the market,the introduction of pensions into the market,and the increase in holdings by the national team.From the establishment of the first fund in 1991 to the end of December 2017,the number of fund management companies in China has grown to 132.The net value of its fund assets was RMB 11.6 trillion,which accounted for 26% of the market capitalization of Shanghai and Shenzhen in the same period.Institutional investors,with their professional investment analysis and rational investment methods,have played a pivotal role in guiding market capital trends,improving corporate governance,promoting financial innovation,and stabilizing the stock market.Based on the experience of the mature development of overseas capital markets,Chinese management actively introduced institutional investors and vigorously promoted its development.However,at the same time when institutional investors were developing leaps and bounds,the two rollercoaster rides of the A shares in 2007 and 2015 showed that the Chinese stock market's skyrocketing plunge has not improved.Therefore,it is of great theoretical and practical significance to deeply study the relationship between institutional investors and the stability of the securities market.Combating the existing literature at home and abroad,this paper finds that the research conclusions of whether institutional investors can play the role of “market stabilizer” are not consistent.Based on the existing research,this paper studies the influence of institutional investors on market stability from the macro and micro perspectives by constructing an empirical model.(1)0n the macro level,the status quo of China's stock market stability is first analyzed,followed by the Granger causality test to study the causal relationship between the fund index and the broader market index.Finally,the TARCH model is established to study the impact of the growth of institutional investors on the volatility of China's stock market.(2)On the micro level,on the one hand,a panel regression model was established by selecting a number of indicators such as institutional investor's shareholding ratio,stock price volatility,and dummy variables representing bull and bear market,and the effects of institutional holdings on stock fluctuations were staged.Research.On the other hand,the LSV model was used to measure the behavior of the stock investment fund's flock,and analyzed the influence of the flock behavior of securities investment funds on the volatility of the stock market.The findings are as follows.(1)Macro-inspectionRelative to overseas markets,China's stock market has the characteristics of frequent fluctuations and large margins.The Granger causality test of the fund index and the broader market index shows that the fund index and the broader market index constitute a causal relationship,but the stabilizing effect of institutional investors on China's stock market has not yet formed.The TARCH model study shows that the expansion of institutional investors not only failed to stabilize the stock market,but also exacerbated the volatility of the stock market.(2)Micro-inspectionAt the micro level,the institutional investor's shareholding behavior and herd behavior are mainly studied in detail.A study of institutional investors' stock-holding behavior found that: From the perspective of the entire sample period,institutional investors are not effective in building a stale market but aggravated the volatility of the stock market.In the bull market,institutional investors have a greater impact on stock volatility.A phased investigation found that before 2013,whether institutional investors were bullish or bearish,institutional investors played a role in boosting the stock market's sharp decline.After 2013,no institutional investors were found to have an impact on stock volatility in a bear market,but the bull market is still an important factor in causing stock market volatility.The study of institutional investors' herd behavior found that: The sales of sheep by institutional investors have aggravated the decline in stock prices and increased the volatility in the stock market;and the buying of herding has prevented stock prices from falling further.Stabilize the effects of stock market fluctuations.Based on the above conclusions,this paper puts forward corresponding policy recommendations from aspects such as perfecting the laws and regulations of the securities market and strengthening information disclosure.