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Researches on the Behaviors and Its’ Market Effect of the Security-Investing Fund of China

Author: TangDaJie
Tutor: HuJun
School: Jinan University
Course: Industrial Economics
Keywords: Herding Behavior Feed-Back Trading Behavior Market Volatility LSV Model GARCH Event Model Behavioral Finance
CLC: F832.51
Type: PhD thesis
Year: 2007
Downloads: 1950
Quote: 8
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Abstract


The individual investors have been playing a dominant role in the market ever since the stock market appears in our country. In the early days, the stock market fluctuated acutely. It is thought that lacking of institutional investors result in the high volatility of our stock market, and both scholars and market participators think that the development of security-investing funds are crucial to the stabilization of the stock market. During the recent 10 years, the security-investing funds have developed dramatically, and they gradually become the main body of the market. What’s the effect of security-investing funds on the stock market? Do they stabilize the market? The answers of these questions are significant.From the points of herding behavior and feedback trading behavior of security-investing funds, this paper deeply analyze the effect of security-investing funds’ market behaviors on the market and testify whether the introduce of security-investing funds will stabilize the market or not. This paper also approves which behavior will stabilize the market.Based on the behavioral finance and the information economics, this paper investigates the above issues by using the normative and the positive methods simultaneously, and using the qualitative and the quantitative methods simultaneously. In the aspect of the herding behavior analysis, this paper verifies the buying and selling herding behaviors according to the bulletin data by using the LSV model. In the aspect of testing the feedback trading behavior, this paper introduces the volatility into the regression model to interpret the change of feedback trading behavior aroused by the market volatility. By using the EVENT research method, this paper also approves whether the market feedback trading behavior changes or not before and after the security-investing funds enter the market. At last, by making use of the latest GARCH event model, the paper testifies that there are jumping changes in the market volatility after the security-investing funds enter the market. These changes are the factors affect the market volatility aroused by the security-investing funds.In the test of funds’ herding behaviors, this paper finds that herding behaviors obviously exist in the security-investing funds. And the coefficient of herding behaviors is 4.2%, higher than that of USA which is 3.4%. There is much difference in the scale and the time of security which the funds buy and sell. There is sellingherding behavior mainly in the large scale stocks and buying herding behavior mainly in the small scale stocks. There is buying herding behavior mainly in the stock traded publicly early and selling herding behavior mainly in the stocks traded lately.This paper finds that positive feedback trading behavior exists ubiquitously in the stock market. Comparing with the individual investors, the institutional investors have the same direction and the same degree of feedback trading behavior. This fact shows that there is no remarkable influence of security-investing funds on the market only from the point of feedback trading behavior.In the test of the relation between market volatility and security-investing funds, the paper discovers that the market volatility in both Shanghai market and Shenzhen market falls down structurally after the entry of security-investing funds. The funds stabilize the market.There are two behaviors of funds that might influence the market volatility. But this paper does not find any evidence that the feedback trading behavior has a remarkable effect on the market volatility. Therefore it is concluded that the herding behavior of funds accelerates the adjusting of the stocks price, and accordingly these funds and their herding behaviors stabilize the market. This conclusion differs from the ones draw in some overseas research

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial market
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