The Influence Of QFII Investment Network Properties On Stock Returns

Since its introduction into the Chinese capital market in 2003,the Qualified Foreign Institutional Investors(QFII)system has steadily risen its.investment quota and has become the second-largest institutional investor after the fund in the A-share market.QFII will conduct rigorous investigation and analysis of investment targets,so foreign institutions prefer a mutual investment model of sharing information and resources.This paper aims to study the investment network properties formed by QFII's co-investment,and the impact of these properties on stock returns.The social network analysis method is used to study the investment network properties and structural characteristics of QFII,by analyzing the quarterly shareholdings data of QFII from June 2007 to March 2017.It shows that the overall density of QFII investment network is relatively low and shows obvious stratification.Experienced institutions such as UBS,Merrill Lynch and Morgan Stanley establish the core regions,while most of QFII are on the verge of a network or in isolation.The impact of QFII investment network properties on stock returns is analyzed by multiple linear regression,cross-sectional regression and quantile regression,which uses the monthly or quarterly stock returns as the dependent variable and the three central indexes of investment network as independent variables.There are three main empirical results.First,there is a positive correlation between the degree centrality and stock returns.That is,the QFII would be located in a more central location and has greater influence if it has more relationships with other institutions through joint investaent.Meanwhile,the stock returns held by the QFII is higher.Second,the closeness centrality has positive correlation with stock returns.That is to say,when QFII is closer to other agencies in the network and closer to the center,which means it has more information resources and stronger influence,the invested stock returns is higher.Last,the betweenness centrality has negative correlation with the stock returns.If the QFII tend to act as a medium of communication among other agencies,which means it has stronger power of transmit information and resources,the returns of shares held by the QFII is lower.