Research On The Relation Between Institutional Investors And The Liquidity Of Stock Market In China

The liquidity is a very important indicator to test the quality of the stock market, and decides whether the market is mature or not. However, according to "the report of the market quality" issued by SSE in 2008, the liquidity of our country's stock market is still at a relatively low level, and the market needs to be further improved. Although there are a lot of factors impacting the liquidity of stock market, this article selects an very important factor, which is institutional investors. The reason for choosing such a relatively unique perspective is that the institutional investors have been the dominant forces in the stock market, and key influence factors of the market liquidity. Therefore, the study on the relationship between the institutional investors and the liquidity of stock market has a great theoretical and practical significance.Firstly, this article reviews both the domestic and foreign research. Secondly, this article analyzes the relationship between the institutional investors and the liquidity of stock market from both theoretical and empirical perspective. From the theoretical analysis and empirical results, it comes to the conclusion that there is a positive correlation between our country's institutional investors and the liquidity of stock market, and this positive correlation is more remarkable in a bull market. Finally, combining the theoretical analysis and empirical findings of the study, this article proposes some policy suggestions to improve the liquidity of stock market in China.