An Empirical Study On The Impact Of Trust Shareholding On Stock Price Volatility

The Shanghai Composite Index rose 52.87% in 2014,becoming the biggest highlight of global stock market in that year,which attracted the attention of global investors.In June 12,2015,the highest price of the Shanghai Composite Index was 517.89 billion yuan,with a turnover of 106.02 billion yuan,ushering in a short wave of leveraged bull market.Many scholars believe that leverage cause the Mad Bull market.During the period of Mad Bull,structured trust and umbrella trust have become channels of many investors to finance and invest.From the first quarter of 2010 to the fourth quarter of 2013,trust in the stock market has slowly developed from 87.885 billion yuan to only 303.093 billion yuan.From the first quarter of 2014 to the second quarter of 2015,trust in the stock market reached 1,411.554 billion yuan from 313.983 billion yuan.However,on June 12,2015,the regulatory authorities issued the Notice on Strengthening the Management of External Access to the Information System of Securities Companies,which prohibits securities companies from providing securities trading interfaces for overthe-counter capital allocation and umbrella trust.Then,on July 12,2015,it issued Opinions on Cleaning up and Rectifying Illegal Securities Business Activities,clearing up umbrella trust and over-the-counter allocation.Restricting the development of trust stock market,the scale of trust investment in the stock market has also dropped from 1411.554 billion yuan to 414.178 billion yuan,while the Shanghai Composite Index has dropped to 285.071 in just two months,and then entered the bear market.With the increasing scale of trust in China's stock market,the impact of trust on China's stock market can not be underestimated.Trust as an institutional investor should have played a role in stabilizing the stock market.However,many scholars believe that,due to the "leverage" characteristics of structured trust business,it may exacerbate the stock price wave and magnify the irrational market in 2015.Leverage distinguishes trust from other types of institutional investors.In the second quarter of 2018,trust in the stock market has reached 815.703 billion yuan,accounting for 1.48% of the total market value of A shares,becoming the fifth largest institutional investor in China.In institutional investors,trust accounts for a large proportion.Considerated China's actual situation,it is necessary to clarify the relationship between trust company ownership and stock market volatility in China.The paper mainly focuses on the impact of trust ownership on stock price volatility.Reviewing the previous literature,it is found that there is no unified view on whether institutional investors restrain or aggravate stock price volatility in academic circles.Does trust aggravate stock market volatility or restrain volatility? Then,we put forward the hypothesis and alternative hypothesis.Hypothesis 1a: In the whole interval,trust shareholding restrains the fluctuation of the stock price of listed companies;Hypothesis 1b: In the whole interval,trust shareholding aggravates the fluctuation of the stock price of listed companies.Some scholars found that the impact of institutional investors on stock price volatility is uncertain under different market conditions and company size.It is necessary to explore the relationship between trust and stock price fluctuation in the case of differentiating market and company size.The hypothesis 2a is that trust aggravates stock price volatility during the period of market rise.Hypothesis 2b: Trusts exacerbate stock price volatility during a market downturn.Hypothesis 2c: Trust restrains stock price volatility during market adjustment.Hypothesis 3: Trust shareholding aggravate the stock price fluctuation of small-capitalized listed companies;Trust shareholding restrain the stock price fluctuation of large-capitalized listed companies.In the paper,we uses the fixed effect panel model to analyze the relation between trust and volatility.The paper explores the impact of trust on stock price volatility from the overall stage,different market conditions and different company sizes.The conclusions drawn in this paper are as follows: Firstly,trust shareholding restrains the fluctuation of stock prices.Secondly,trust does not affect stock price volatility when the market rises;trust intensifies stock price volatility when the market falls;trust restrains stock price volatility when the market adjusts.Thirdly,trust shareholding restrains the volatility of the stock price of small-scale companies;trust shareholding has no effect on the volatility of the stock price of large-scale companies.The main contributions of the paper are as follows: Firstly,the research object of the paper is trust,which is different from previous studies on institutional investors and stock price volatility.Previous studies mainly focused on institutional investors or other types of institutional investors,such as private equity,public offering,QFII,insurance or social security funds,while less on trust.The paper can enrich the relevant research of institutional investors.Secondly,the paper studies the impact of trust ownership on stock price volatility from a micro perspective.In the past,the research perspectives on trust ownership and stock price volatility were mostly limited to the macro-market,but there was no research on the relationship between trust and stock price volatility of listed companies from the micro-perspective.Thirdly,the paper uses empirical methods to study the impact of trust ownership on stock price volatility.Previous studies on trust and stock market stability are mostly based on qualitative research.Few scholars verify it through actual data,which lacks persuasion.