| In the past 30 years,China’s capital market has developed rapidly and achieved remarkable achievements.Whether the capital market can well serve the real economy is related to China’s economy transformation and further growth.However,in recent years,China’s stock market is facing a high degree of uncertainty.High volatility and frequent market chaos have become normal.In this context,how to improve the information environment of the securities market has become a common concern of both the academic community and the industry.Although China’s securities market is large in scale,its main participants are still individual investors,which is in stark contrast to the investor structure dominated by financial institutions in developed western markets.The main difference between individual investors and institutional investors is the ability to obtain market information.Institutional investors can acquire and analyze large amounts of information and data in real time to make relatively accurate judgments about the potential value of financial assets and to trade on this basis.On the contrary,individual investors’ information acquisition and analysis capabilities are weak,and their trading behavior is mainly based on price fluctuations.Market price volatility triggers the herding behavior of investors,which is the source of the market chaos.This paper defines the information environment of the securities market as two indicators:"pricing efficiency”and "liquidity”Based on the unique investor structure in China,the paper discusses the potential effects of the following two policy paths:First,will the introduction of institutional investors be able to improve the information environment of the securities market?Second,under the current investor structure,how does the financial derivatives market regulation policy affect the underlying securities market information environment?This article is based on theoretical analysis,supplemented by empirical tests.The main contents are as follows:First,based on the classical rational expectation theory,this paper establishes a symbolic system that conforms to the object of analysis.The rational expectation theory advocates the discussion of the formation process of market price from the trading behavior of market micro-subjects.What this paper is studying is the market information environment problem under the micro-subject structure of institutional investors and individual investors.This paper is based on the classic rational expectation theory literature and establishes a set of rational expectation theory analysis framework that is simple and convenient to expand.It also strictly defines the market information environment indicators such as "pricing efficiency”and“liquidity" with reference to the existing literature.This provides a theoretical basis for subsequent analysis.Secondly,the dual investor structure is introduced into the rational expectation model,and the impact of the size of institutional investors on the market information environment is analyzed under the investor structure dominated by retail investors in China,and the conclusions are empirically tested.In this paper,individual investors are assumed to be investors with heterogeneous private information,and institutional investors are assumed to be investors with information advantages(relative to individual investors).Theoretical analysis shows that under the current investor structure in China,vigorous development and introduction of institutional investors can improve market pricing efficiency,but it may also worsen market liquidity.In order to verify the above conclusions,the article uses the detailed position data of China’s open-ended active funds and the data of listed companies to examine the impact of fund trading scale on stock pricing efficiency and liquidity.A conclusion consistent with the theoretical hypothesis was obtained.Third,under the framework of dual investor structure and dual market structure,the paper analyzes the impact of China’s financial derivatives market regulatory policies on the information environment of the securities market.The high threshold and high leverage of financial derivatives trading determine that its participants are mostly institutional investors.Under the unbalanced dual investor structure in China,the influence of financial derivatives trading on the underlying securities market information environment needs further investigation.This paper further introduces the dual market structure of the two risk assets of underlying securities and derivative securities under the framework of binary investor structure.The analysis shows that when the number of institutional investors(more than individual investors)is sufficient,a fully open financial derivatives market will simultaneously maximize the pricing efficiency and liquidity of the securities market;otherwise,it is dominated by individual investors.Under the investor structure,with the changes in the size of the financial derivatives market,the pricing efficiency and liquidity of the underlying securities market always move in the opposite direction,and the complete opening of the derivatives market is no longer a choice.Fourth,the Shanghai and Shenzhen 300 stock index futures listing and trading control are regarded as two "quasi-natural experiments",empirically testing the impact of financial derivatives transactions on the underlying securities market information environment.This paper uses the double difference method to empirically test the impact of the two events of the Shanghai and Shenzhen 300 stock index futures in April 2010 and the stock index futures trading control since August 2015 on the pricing efficiency and liquidity of the constituent securities market.The study found that the impact of stock index futures listing on the underlying securities market information environment is neutral,while the stock index futures trading control policy significantly affects the underlying securities market information environment.Specifically,stock index futures trading controls increase the pricing efficiency of constituent stocks,but at the same time reduce the liquidity of stocks.The above empirical results verify the conclusions of the theoretical analysis of this paper to some extent.This paper has carried out an in-depth theoretical analysis and empirical test on the information environment of the securities market under the special investor structure in China.The main contributions are reflected in the following three aspects:First,the core assumptions are in line with China’s reality.The existing theoretical literature about rational expectation mostly takes the developed western market as the research background.This paper introduces the unique investor structure of China into the classic rational expectation model,and discusses the interaction behavior between institutional investors and individual investors.Traditional rational expectations theory often regards individual investors as exogenous market noise.The above practice is not applicable to model China’s securities market.There are hundreds of millions of individual investors in China’s securities market,and their group behavior is driven by market prices,which also systematically affects market prices.If the above process is regarded as exogenous,it will be unlikely to obtain conclusions that conform to the reality of China’s market.In this paper,institutional investors and individual investors are regarded as endogenous rational investors,but the difference between the two is that institutional investors have absolute market information advantages,while individual investors’ private information is relatively scarce.Under this setting,institutional investors make trading decisions based on their own information sets,while individual investors’ trading behavior relies mainly on price signals.The market price is ultimately determined by the aggregate behavior of all investors,and it also affects the behavior of different investors:the interaction between institutions and individuals through market price signals affects the market information environment.This setting is essential for China’s capital market.Second,this paper has made a reasonable expansion of the Chinese reality problem.Chapter 3 of this paper mainly discusses the influence of the strategy of China’s vigorous development and introduction of institutional investors on the information environment of the securities market.The model abstracts this strategy as a process of increasing the relative number of institutional investors versus individual investors.Chapter 4 mainly discusses the impact of China’s financial derivatives market control policies on the information environment of the securities market.Under the theoretical framework of this paper,the size of the financial derivatives market is represented by the proportion of institutional investors authorized to obtain derivatives transactions to the total number of institutional investors.At the same time,the conclusion of this paper is highly dependent on the core assumption of the dual investor structure dominated by individual investors,which means the theoretical channel of the article is clear.Third,the paper empirically tests the conclusions of the theoretical model from multiple perspectives.First,this paper attempts to analyze the two indicators of market pricing efficiency and liquidity under the same empirical analysis framework,and tries to explain the intrinsic relationship between empirical results and theoretical analysis.Second,this paper uses a number of indicators to characterize market pricing efficiency and liquidity,and draws a firm conclusion.Specifically,when measuring pricing efficiency,the two indicators of "share price non-synchronization" and "stock price-profit sensitivity" are used respectively;when measuring liquidity,"Amihud illiquidity indicator" and "Roll effective spread indicator" are adopted.".Thirdly,the shareholding ratio of multi-purpose institutions in the empirical literature has been used as the proxy variable of institutional trading behavior.For the first time,this paper adopts the total amount of open-end active funds in the year as the proxy variable of institutional trading behavior.This variable more accurately portrays the trading behavior of institutional investors rather than holdings.Fourthly,this paper uses the double difference method to examine the impact of stock index futures listing and trading control policies on the underlying securities market information environment,considering the difference in price reaction between constituent stocks and non-component stocks,market changes,and direct state intervention.The regression results have an impact and a series of robustness tests are performed to enhance the reliability of the conclusions.Through a series of theoretical and empirical analysis,this paper draws clear conclusions and policy recommendations:First,the strategic move to develop institutional investors is conducive to improving market pricing efficiency.However,under the retail-based investor structure,this move may also worsen market liquidity.Therefore,in the process of structural transformation of investor structure,we should strengthen the monitoring of market liquidity and guard against systemic risks.Second,the development of financial derivatives markets and the effectiveness of regulatory policies are highly dependent on investor structure.Under the current retail-based investor structure,the complete opening of the financial derivatives market may encourage excessive speculation of institutional investors,thereby worsening the underlying securities market information environment.Therefore,under the current investor structure in China,it is still necessary to impose appropriate restrictions on the size of the financial derivatives market.Third,the theoretical analysis of this paper shows that there is a certain inherent logical order in the improvement of investor institutions and the development of emerging financial derivatives markets.The successful transformation of the investor structure is a prerequisite for the complete opening of the emerging financial derivatives market.In the early stages of financial liberalization and liberalization,it is important to improve the structure of investors while maintaining a cautious attitude toward emerging derivatives.When the investor structure is significantly improved,we should consider gradually loosening the regulation of the financial derivatives market,providing institutional investors with more investment instruments and attracting more institutional investors to participate in China’s capital market. |
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