An Empirical Analysis Of The Institutional Investors In China's Stock Market Information Superiority

I examine what type of institutional investors in China stock market have potential information advantage by investigating the relationship between ownership and change of ownership of institutional investors for current period and future returns of their stock holdings during subsequent quarters. I find out that social security fund exhibits forecasting power of future stock returns, specifically stock returns in the next first and second quarter, which could be attributed to its information advantage. Further investigation of financial indexes of companies in the stock holdings tells us that ROE, EPS, book-to-market ratio, market capitalization can help explain why social security fund has better informational advantage over some of the other types of institutional investors in forecasting stock returns in some subsequent quarters. We can see no financial index makes social security fund top all other types of institutional investors. So better knowledge of financial conditions of the stock holdings are just part of the reasons why social security fund can better predict future stock returns.