The Impact Of Institutional Investors On The Volatility Of China's Stock Market

Since the formal establishment of China's securities market in the early 1990s,China's securities market has developed rapidly in just over 20 years and made remarkable achievements.However,compared with the mature securities markets in Europe and the United States in the same period,China's securities market has been characterized by frequent sharp rises,falls and high volatility.For a long time,scholars generally believe that the high volatility of China's stock market comes from the investment structure of individual investors in China's stock market,but there are also a large number of literatures show that China's institutional investors do not seem to be able to reduce the volatility of the stock market.Therefore,the relationship between institutional investors and China's stock market volatility needs to be studied from many aspects and angles.This paper attempts to analyze the relationship between institutional investors and stock market volatility through mathematical model from the perspective of principal-agent and investors' share holding,combining the heterogeneity of investors' attributes and the heterogeneity of market development.On this basis,this paper uses the propensity score matching and fixed effect model to test the hypothesis put forward by the mathematical model on the premise of controlling the investors' possible stock selection preference and draw the final conclusion.From the perspective of Principal-agent of institutional investors and individual investors,this paper finds that institutional investors will change their investment strategies because of their purchase and redemption behavior.The stronger the correlation between purchase and redemption with performance is,the more institutional investors tend to carry out high-risk asset allocation,which often means high volatility.When a large number of institutional investors prefer the allocation of high-risk assets,the system volatility of the stock market will inevitably be improved.From the perspective of investors' holding amount,for a market with high transparency and maturity,the concentration of shares will inevitably lead to the increase of market volatility,which has nothing to do with herd effect or behavioral finance.That is to say,the concentration of funds from individual investors to institutional investors will also increase the volatility of the stock market.After considering the development of China's stock market and the heterogeneity of investors,this paper further believes that China's fund institutional investors can no longer play a role in stabilizing the stock market in the current market environment,while other types of institutional investors can still stabilize the volatility of China's stock market to a certain extent.Based on this,this paper believes that in the short term,it is feasible to standardize the behavior of fund institutional investors,improve the access and exit system of fund business,and strengthen the supervision of fund institutional investors represented by private funds.