China's Social Security Fund, Insurance Funds, Proprietary Information Advantage And Investment Preferences Of Empirical Research

In recent30years, the development of institutional investors is one of the most important changes of the international capital market. In western countries, there is a trend that the institutional investors are gradually dominating the capital market. Institutional investors in emerging market such as China have also been developing dramatically rapidly. Now, in China, the total market value of institution’s holdings is up to60%of the total market value of the A share market. With the development of institutional investors, the research about institutional investors is more diverse than before. The early studies in western countries focused on the mutual fund, and now they pay more attention on the dynamic shift of investors’behavior and the heterogeneity of diverse institutions. However, in China, the current studies are still focus on fund, and QFII recently; and there is little empirical study about other institutional investors.The institutional investors in China include fund, QFII, insurance companies, financial companies, non-financial listed companies, annuity, self-brokerage, brokerage set, social security funds, trust companies, PE, other corporate and banks. Every institution has its own investment objectives, and legal constraints; as a result, they revealed various investment behaviors. In this paper, we focus on social security funds, insurance companies, and self-brokerage. Based on their investment, we compared the legal constrain, information advantage and their preferences.We find that the Social Security Fund has an information advantage in short-run but not in long-run. To the contrary, insurance companies have long-run advantage. Self-brokerage only shows short-run advantage when the market rises.Then we compare the preference of the three types of investors. We find that Social Security Fund and insurance companies prefer large companies with low book-to-market ratio and low beta; however their preference are shifting and we find that they are buying smaller companies with high BM and high beta. Meanwhile, the size of the ownership stake of Social Security Fund is higher while the ownership stability of insurance companies is higher. However, when we leverage regression to depict the stock preference of the three, we find that Social Security Fund focus more on the market-related variables just as self-brokerage. But insurance companies show extremely preference for fundamentals.This article concludes that the insurance companies are more prudent than the other two, and the investment behavior is consistent with their goal and constrain. Self-brokerage appears just like transient institution. Social Security Fund falls in between. But its behavior should be more consistent with its investment philosophy: value, long-term, and responsible.