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A Study of the Influences of Security Investment Funds' Behavior on the Stability of the Stock Market of China

The influence of security investment funds imposing on the stock market becomes increasingly obvious. While transforming saving capital and ameliorating investor structure, the behavior of investment funds has made certain side effect on st
Submitted On: 04-01-2010 | Views:	Article Tools:

The influence of security investment funds imposing on the stock market becomes increasingly obvious. While transforming saving capital and ameliorating investor structure, the behavior of investment funds has made certain side effect on stock market, which adds the atmosphere of speculation in stock market and makes stock market fluctuate. It impairs the status and function of security investment funds in security market, and also limits the development of investment funds. How to understand the behavior and influence of security investment funds, which is essential to the development of funds and security market, and has important theory research and application value.Under the direction of finance and quantity economics, led by the influence of investment funds on stock market, based on analyzing investment funds' behavior accurately, this paper, which uses the method of qualitative analysis and quantitative analysis, tests the influence of security investment funds' behavior on volatility in Chinese stock market. It concluded that there is high stock and industry concentration,serious herding behavior among investment funds. They possibly make side effect on volatility in stock market. The empirical analysis also validates that security investment funds also don't fulfill the function of stabilizing the stock market. It embodies that stock share holding of funds is positively relevant to volatility in stock market. The increase of stock share holding of funds adds the volatility in price. The cause lies in small volume of security market and singularity of investment varieties, the poor quality of listed company and scarcity in effect supervision, and so on. So, in order to improve the role of investment funds in stabilizing stock market, this paper puts forward the following countermeasures: develop the security market and quicken lawmaking and system building; improve quality of listed companies and perfect withdraw mechanism; develop investment funds more and strengthen supervision on investment funds' behavior. In order to better fulfill the function of stabilizing the stock market, while creating loose environment for security investment funds, we should strengthen supervision on deal and investment combination of investment funds.

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