Research On The Impact Of QFII Holdings On The Volatility Of The A-share Market

Since the establishment of Shanghai Stock Exchange and Shenzhen Stock Exchange in the early 1990 s,the scale of China's stock market has been expanding,and it has gradually become the second largest stock market in the world after the United States.However,in the process of development,there are still relatively frequent large fluctuations,which will have a negative impact on national economic and social development.In 2002,China introduced qualified foreign institutional investors(QFII),aiming to attract more foreign value investors and foreign long-term funds into the stock market,and guide Chinese investors to form a more mature value investment concept through QFII's shareholding behavior,so as to stabilize the market and promote the smooth opening of China's stock market.In September 2019,China announced to cancel the limit of QFII's investment quota and further promote QFII's investment in A-share market.With the increase of QFII's shareholding scale,whether QFII can achieve the desired purpose and how much influence it has on the stock market volatility.In recent years,there are relatively few relevant papers on such issues.Therefore,it is of great significance to study the relationship between QFII holdings and stock market volatility through the latest A-share market data.This paper first reviews the research status of QFII and stock market volatility at home and abroad,expounds the relevant concepts and theories,then analyzes the mechanism of QFII's stock ownership influencing stock market volatility from the perspective of stock market,listed companies and investors according to the sorted literature and theories,and investigates the current situation of QFII and A-share market volatility in China,then empirically analyzes the influence of QFII shareholding on stock market volatility from the perspective of the market as a whole and individual stocks.At the market level,the CSI 300 index is selected as the research object of the whole market.The VAR model is used to analyze the impact of QFII holdings from the third quarter of 2005 to the third quarter of 2019,and further divided into two stages of different investment quotas to investigate whether there are differences.At the stock level,the sample data of 191 stocks held by QFII are selected for research,and the dynamic panel model is used System GMM estimates.First of all,the overall situation is studied,and then different market conditions are distinguished to observe the difference of QFII's shareholding impact.Finally,samples are divided to see the impact of different expansion periods and different shareholding periods.According to the results of empirical analysis,this paper draws the following conclusions:(1)QFII holding has a negative impact on the overall volatility and individual stock volatility of A-share market,which can play a role in stabilizing the stock market.(2)In different stock market,the influence of QFII holding on stock price fluctuation is totally different.The increase of QFII holding proportion can stabilize stock price in declining stock market,but QFII holding can't stabilize the market in rising stock market,on the contrary,QFII holding can cause greater volatility of stock price.(3)QFII holding has different influence on stock market volatility in different development stages.With the increase of QFII investment,QFII shareholding can reduce the volatility of the market as a whole and individual stocks to a greater extent.QFII has a small amount of investment in the early stage and many restrictions on QFII.QFII's shareholding scale is not large enough to play its role.However,with the liberalization of QFII's investment limit,QFII's shareholding has a more significant positive impact on reducing stock market volatility.(4)QFII's short-term shareholding behavior can not play a role in stabilizing the stock market,but exacerbates its volatility.QFII's medium and long-term shareholding reflects a more rational concept of value investment,which can significantly reduce the volatility of individual stocks.Therefore,how to regulate QFII's shareholding behavior needs our attention.According to the research conclusion,this paper puts forward four policy suggestions:(1)Improve the quality of listed companies and attract more QFII shares.We should advocate the listed companies to improve the governance structure and performance,and improve the quality of the company,so as to win more favor of QFII.(2)Improve the information disclosure system of QFII,and strengthen the market supervision.Regulators should strengthen the management of QFII information disclosure and improve the transparency of stock market information.(3)Actively cultivate domestic institutional investors and strengthen risk education for investors.QFII will play a role in improving investors' ideas,and actively guide domestic investors to form long-term value investment ideas,so as to reduce irrational speculation in the stock market.(4)Improve risk hedging mechanisms and strengthen risk management of international capital flows.Accelerate financial innovation,and make the market have enough financial derivatives to hedge risks,improve the early warning and response mechanism of international capital flow,and effectively prevent its flow risk.