The Impact Of Institutional Investor's Holding On Stock Price's Idiosyncratic Volatility

Clarifying the impact of institutional holdings on idiosyncratic volatility can provide some policy recommendations for market regulators on how to play the role of institutional investors in stabilizing the market.The main work and research results of this paper are as follows:Improve institutional investors' shareholding behavior,build regression models from four dimensions of depth,breadth,short-term variation,stability,and evaluate their impact on idiosyncratic volatility.The study found that:(1)Institutional investors' shareholding depth and idiosyncratic volatility have an inverted U-shaped relationship.The shallower institutional holdings exacerbate idiosyncratic volatility.As institutions hold deeper,they can actively participate in internal governance,Improve information disclosure and effectively suppress trait volatility;(2)Multiple institutions jointly hold individual stocks,that is,institutions hold wide stocks,information competition is fierce,private information is quickly integrated into stock prices,and trait volatility is suppressed;(3)Short-term variation in institutions The greater the range,the greater the inflow or outflow of funds to individual stocks by the institution,which will push up or suppress the price of individual stocks and aggravate the volatility of the particularity;(4)The institution adjusts the position within three years within a relatively small range,and the shareholding is relatively stable.This long-term transaction shows that institutions implement value investment strategies to effectively stabilize idiosyncratic volatility.Institutional net increase and net decrease will release different market signals and lead to irrational trading behavior of retail investors.This paper examines the impact of institutional increase and decrease on idiosyncratic volatility.It is found that:(1)institutional net increase contributes to the stock price,which leads to retail investors pursuing the rise,while institutional net decrease contributes to the decline of the stock price,because of retail gambling The psychological existence will lag the exit,and the aggravation degree of the good news released by the increase of institutional holdings to the idiosyncratic volatility is greater than that of the net decrease of institutional holdings;(2)there are differences in the reaction of retail investors to the good news and the bad news in different market situations,the BB rule is used to diagnose the stock market cycle,and the samples are further divided into the market rising group and the market falling group,and the regression model test is carried out respectively The results show that: when the market goes up,the institutional net increase will aggravate the idiosyncratic volatility more,and when the market goes down,there is no significant difference in the impact of institutional net increase and net decrease on idiosyncratic volatility.The PSM model was used to study the influence degree of different types of institutional investors' shareholding on idiosyncratic volatility.The results showed that: FUND tends to implement noisy trading,and their shareholding ratio significantly exacerbates idiosyncratic volatility,with the greatest degree of impact,so FUND has not yet played its role to stabilize the market.QFII pays more attention to value investment,and effectively suppresses idiosyncratic volatility.The impact of INSURANCE & SOCIAL SECURITY FUND on idiosyncratic volatility is not significant.It may stem from the fact that insurance & social security funds are more willing to hold financial stocks and have lower holdings of non-financial stocks,making it difficult to interfere.Due to its limited funds,the ENTRUST is also not significantly disruptive to idiosyncratic volatility.Based on this,the paper puts forward policy suggestions.Regulators should introduce professional institutions,encourage institutions with deep shareholding to make good use of their rights,and participate in the internal governance of the company.Institutions with poor stability should appropriately relax the performance pressure of investment managers and cultivate the concept of value investment.