Research On Relationship Between Fund Shareholding Structure And Stock Returns

In the stock market, individual investors and institutional investors are often regarded as two completely different types of investors, because of the essential difference between the two:individual investors tend to be noise traders, institutional investors is based on information and professional skills to carry out transactions. It is based on the awareness of institutional investors more information superiority and expertise, national stock market actively promote the cultivation of institutional investors, especially development of China’s securities market. However, due to the commission-agency costs, information superiority and professional ability of institutional investors is bound to be sufficient significantly, and able to cover agency costs between capital owners and institutional investors at this time personal funds entrusted to the institutional investors is the optimal results. So, institutional investors have the information and professional skills? Their transactions whether they play reveals the role of information, in other words, whether the information from the holdings of institutional investors to predict stock returns?Based on the seasonal dataset of open-ended funds from2005to2010, we found that the more number of funds began to hold some stock, or the more aggregate holdings increased, or more diversified hold by the funds, would retrieve higher return in current and next season. Subsequent research showed that such premium could be explained by the information of funds’ manager, we found that there exists an optimal aggregate holdings for funds’ owning a stock. Our research promoted the understanding of the function of funds to transfer information, and present helpful comments for individual and institutional investors. Finally, We based on the above results, and simulated nine combination investment strategies, then got a significant excess profits.The analysis found:shares are widely held by funds and having similar ranking positions can make higher yield in the current and the next issue. Conclusion was established when the fund holds the stock increased. Further research showed that these gains can be part of the fund manager’s information advantage explanation. Secondly, there is an optimal stake, when holding more than this proportion, income at a later stage will be reversed. This may be due to mobility of compensation or expectations on the future reduction of the shares. Finally, we also found that, in the next quarter, stock returns can be better and more stable than a single index excess return, after a combination of two.