| The Chinese A-share market has seen big bubble and crash for several times in the last 30 years,causing heavy losses to investors.Experts tend to blame the big swings on retail investors,which account for over 99% of all the investors in the share market.As a result,the government hopes to reduce market volatility by developing institutional investors since they are more rational in theory.However,with the highspeed scale expansion of security investment funds and other institutional investors,extreme price rises and falls still come up in recent years.Here comes the question that whether if security investment funds in China really help to stabilize the share market.Based on the efficient market hypothesis and behavioral finance,this paper makes a theoretical analysis on the mechanism of the impact of fund holdings on stock market volatility.The conclusions are as follows:(1)From the perspective of fund,in order to maximize the profits,there are herd effect and positive feedback transaction in the investment strategies of fund managers,which promote stock market volatility.(2)From the perspective of market,China's stock market is still unsuitable for value investment,resulting in the fund's failure to play the role of market stabilizer.On the basis of theoretical analysis,this paper makes an empirical analysis using the quarterly data of fund holdings in the A-share market from 2014 to 2018 as samples.The main conclusions are as follows:(1)There is a significant positive correlation between the fund shareholding ratio(and the change of shareholding ratio)and the volatility of stock return.(2)The larger the proportion of shares held by funds,the more volatile the stock price is,and this phenomenon is more obvious in bear market than in bull market.(3)In bull market,the change of fund shareholding ratio(including increase and decrease)reduces stock volatility,while in bear market,the change of fund shareholding ratio still aggravates stock volatility. |
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