The Influence Of ETF To Domestic Stock Market Volatility

After nearly 20 years of development,the Exchange Traded Funds(ETFs)China have begun to take shape.ETF’s unique dual trading mechanism and physical subscription and redemption mechanism make it different from Open-end funds.Studies have shown that the development of Open-end funds will increase the volatility of the stock market.Compared with Open-end funds,the dual trading mechanism of ETF can effectively deal with the inherent redemption risk of open-end funds;The characteristics of ETF passive tracking index reduce the herding effect caused by fund investment to a certain extent;The passive performance evaluation benchmark of ETF effectively reduces the short-sighted behavior of fund managers.These characteristics reduce the impact of ETF on stock market volatility compared with traditional securities investment funds.On the other hand,the real-time pricing mechanism of ETF in the secondary market provides arbitrage opportunities for high-frequency traders,which may transfer the impact of ETF level to the underlying stock level,thus increasing the volatility of the underlying stock.This paper takes the constituent stocks of CSI 300 index as the research object,and selects the quarterly panel data of constituent stocks of CSI 300 index from January1,2016 to December 31,2021 for empirical analysis.According to the types of holders,this paper divides the circulation market of a stock into four parts,which are held by individual investors,ETFs,non ETF funds and non fund institutional investors.Based on this,this paper establishes the shareholding model of individual investors and institutional investors,and studies individual investors,ETFs The impact of the shareholding ratio of various market participants such as funds other than ETFs and institutional investors other than funds on the volatility of the stock market.The empirical study of individual investor shareholding model shows that the increase of individual investor shareholding will increase the volatility of the underlying stock.The empirical conclusion of institutional investor shareholding model proves that the increase of non fund institutional investor shareholding ratio can reduce the volatility of the underlying stock,while the increase of ETF and non ETF fund shareholding ratio increases the volatility of the underlying stock.The advantages of ETF in redemption risk,herding and short-sighted behavior make ETF play a less important role in stabilizing the stock market than the arbitrage mechanism of high-frequency traders,which leads to ETF increasing the volatility of the stock market.Finally,according to the conclusion,it puts forward policy suggestions on vigorously developing institutional investors and continuing to support the development of ETF,while paying attention to risk prevention and control in the expansion of ETF scale.