Research On The Influence Of Market Anomaly On Institutional Investor Shareholding

There is one after another mysterious market anomaly in the financial literature,some short-lived and some long-standing.Current market anomalies are based on publicly available,free information available to all,and their research and market value has become exceptionally high as the use of market anomalies has been proven to generate substantial additional returns.This places a higher demand on the analytical and discriminatory skills of investors.Institutional investors in China have been an essential force in the development of the securities market,holding a large amount of liquid capital and having a considerable voice in the market.Among them,the fund industry has developed particularly rapidly.Under the covid-19 in 2020,the fund still hit quite bright achievements to attract the attention of the market,so some residents in the asset allocation will consider dividing part of the funds to invest or increase the proportion of the original fund investment.The image of institutional investors is rational,sophisticated and professional.They have access to superior channels and abundant resources and are able to profit by tapping into deep information that is beyond the knowledge of most individual investors.So do institutional investors take full advantage of market anomalies? This article will address this topic and provide answers.This paper combs through the past literature to lay the theoretical foundation for the impact mechanism of this paper’s topic based on the efficient market hypothesis,information asymmetry theory and limited attention theory,and proposes corresponding hypotheses.Combining the current situation analysis and empirical analysis,this paper uses descriptive statistical analysis and modeling empirical regression to selects 16 anomaly factors proven to be valid in China’s market by Fama-Macbeth three-factor model to construct a market anomaly overvaluation index based on the market data of listed companies in China from2010 to 2021 and quarterly data of institutional investors’ shareholding details represented by funds.This paper further divides market anomalies into trading and fundamental categories to explore the impact of market anomalies on institutional investors in all aspects and whether such impact is heterogeneous across institutional investors to enrich the level of empirical analysis.The main conclusions are as follows: First,this paper concludes that institutional investors are indeed using market anomalies for investment transactions,and there is a significant negative relationship between institutional investors’ shareholding spread and the market anomaly overvaluation index.Second,this paper finds that institutional investors use different types of anomalies to different degrees,and in general,they exploit market anomalies more significantly in the trading category and not enough in the fundamental category.Third,the impact of market anomalies on the holdings of different institutional investors differs.The impact of market anomalies on holdings of sophisticated institutional investors is greater than that of upstarts,indicating that sophisticated institutional investors are better able to tap into market anomalies.The impact of market anomalies on holdings of large institutional investors is greater than that of small ones,indicating that large institutional investors are better able to tap into market anomalies.The impact of market anomalies on institutional investors is significantly greater during 2015-2021 than during 2010-2014,suggesting that competitive institutional investors are better able to explore market anomalies after the change from approved to registered system.Finally,based on the findings from both theoretical and empirical analysis,this paper puts forward practical and effective suggestions from three perspectives: For institutional investors themselves,they should dig deeper into the information of market anomalies in the market.For individual investors,they can judge the extent to which institutional investors use market anomalies to select suitable institutional investors.For regulators,they should regulate listed entities to strengthen information disclosure and guide institutional investors to correctly use market anomalies.