Institutional Investor Participation And Stock Price Fluctuation

The stock market in China has undergone nearly thirty years of development since the1990 s,and the phenomenon of stock prices skyrocketing and plummeting still occurs from time to time.The drastic fluctuations in the stock market are often attributed to China’s unreasonable investor structure.Therefore,China has drawn on the experience of mature capital markets and proposed a strategy to develop institutional investors beyond conventional ones.However,against the backdrop of a significant increase in the number and scale of institutional investors,the volatility of China’s stock market has not improved.The academic community has conducted research on the relationship between institutional investor participation and stock price fluctuations,and there is no unified conclusion yet.This article examines the relationship between institutional investor participation and stock price volatility.The article validates the relationship between institutional investor participation and stock price volatility from both macro and micro levels.At the macro level,the article selects A-share market data from the end of the first quarter of 2010 to the end of the third quarter of 2022,and selects the Shanghai Composite Index volatility to measure the volatility of the A-share market,Use VAR model and Granger causality analysis to verify the relationship between the degree and behavior of institutional investors’ participation and index volatility;At the micro level,the paper selects the data of A-share listed companies in Shanghai and Shenzhen from 2010 to the end of 2021,and uses the fixed effect model of panel data to verify the relationship between institutional investors’ participation and stock price volatility.At the same time,robustness tests such as variable replacement,sample replacement period,and instrumental variable method are used to strengthen the reliability of the conclusions,while studying institutional investors’ heterogeneity The dominance of long-term institutional investors and the impact of institutional investor shareholding preferences.The study reached the following conclusions:First,at the macro level,the shareholding ratio and concentration ratio of institutional investors are negatively correlated with the index volatility,that is,the degree and behavior of institutional investors’ participation have a significant impact on the stock market and can calm market volatility.Secondly,at the micro level,there is a significant negative correlation between the shareholding ratio and duration of institutional investors and the overall volatility of individual stock prices.This reflects that the larger the shareholding ratio and duration of institutional investors,the stronger their motivation to participate in corporate governance,which has an inhibitory effect on the volatility of individual stock prices.Thirdly,different types of institutional investors and their shareholding preferences have different effects on stock price fluctuations.In terms of institutional investor heterogeneity,fund holdings have no significant impact on stock price fluctuations,while insurance companies,securities firms,and qualified foreign investors can significantly reduce stock price fluctuations.The higher the shareholding ratio of special institutional investors such as the national team,the weaker the volatility of stock prices.In terms of shareholding preference,institutional investors generally pay more attention to large cap stocks,which have a stronger inhibitory effect on stock price fluctuations in large cap stocks than in small cap stocks.