The Research Of Open-end Fund And Stability Of China's Stock Market

Since the open-end fund was introduced in 2001 in China. With the steady expansion of the scale of the Fund's assets and the increasing number of investors, the market influence also has markedly increased. The launch of open-end fund is designed to eliminate the impact that the market of individual investors as the main cause excessive volatility on the stock market. Also to achieve objectives such as protecting investors, ensuring market integrity and reducing systemic risk. But China's securities market is an emerging market and in a transition period. Using open-end fund as a tool to stabilize the market determines that its impact on the stock market with a certain of policy. The current policy of transparency, continuity and stability are imperfect. So whether the open-end fund has increased the stability of the stock market needs to be researched.By reading the previous literature we found in the developed countries' financial markets, open-end funds can play a certain degree of stability in the role of the stock market, but in China's securities market, there isn't a clearly answer. Through the combination of theoretical analysis and empirical research method, we have researched the relationship between open-end fund and stock market's stability. On the one hand, the open-end fund may stabilized the stock market, on the other hand it can also exacerbate the volatility of the stock market.The article firstly analyzes the development of open-end fund, it has been flourished in developed countries early in the 20th century. But officially started until 2001 in China. Although the open-end funds started lately, with the strongly support from securities regulators, we get a rapid development in just a few years. As the shorter development time, there's problems such in laws and regulations, and market risk is significant, illegal trading exists.Then, from a theoretical point of view, summed up the open-end fund on the stock market, both positive and negative effects. On the one hand, through the collection of social idle capital, the expansion of market capacity, the improvement of market structure, the promotion of market norms, open-end funds can play a role in maintaining market stability. On the other hand, the short-sighted behavior, herding, and the improper redemption of fund holders made of large short-term liquidity funds operation in the market, increasing stock market volatility.Finally, more mature by now cointegration theory and empirical methods ARCH model family to study the introduction of open-end fund on the impact of China's stock market:the first use of cointegration analysis of the fund market and the stock market's long-term relationship, where the main use of open-end funds in the card index and the Shanghai Composite Index and Shenzhen Component Index on since 2003, yield data, according to market trends the time divided into three stages, the results show an open-end fund index and the long-term between the stock market index positive correlation. GARCH and the EGARCH model re-use in China the Shanghai Composite Index and Shenzhen Component Index on post-1999 yield data for statistical analysis and data fitting, where according to open-end fund launch into two periods before and after the time, and further based on market trend is divided into five phases, of different stages of stock market volatility changes, intended to determine whether the structure of stock market volatility changes. Empirical results that:the introduction of open-end fund, did not play a significant stabilizing the stock market, reducing the role of volatility; China's stock market is still not out of the city policy and the impact of negative information than positive information to a large impact on the volatility generated greater impact.Through the above analysis of various aspects, from the perspective of policy formulation, development of efficient capital markets, institutional investors play their role in stabilizing the premise and basis of the stock market, which requires the government would frequent response of the market:changes in the public strategic macro guidance for the Chinese stock market to establish a sound operating rules and a good market order, and to maintain the seriousness of the rules and the market, and carry forward to the standardization of the stock market development. Therefore, it is necessary to improve the relevant laws and regulations, through the system to strengthen the supervision and control of listed companies, the fund company's behavior, but also accelerate the innovation of financial products, investment themes and strategies for fund diversification, cultivating investors rational investment philosophy, In such a market environment for the open-end funds can play a role in maintaining the stability of the stock market.