Abstract
This paper uses the factor regression model of stock returns to quantify the stock price synchronization. Using the data of the listed companies in the Shenzhen SME board market from 2011 to 2015, this paper demonstrates the relationship of the stock holdings of institutional investors, the dummy variables of long- and short-term holdings and the proxy variable of the stock price of listed companies in the SME board. The conclusion is that the relationship between shareholding ratio of institutional investors and stock price synchronicity is an inverted U-shape. It means that in China when institutional investors hold less than a certain percentage, the shareholding proportion positively correlates with stock price synchronization. When institutional investors hold more than a certain percentage, the proportion of shareholding negatively correlates with stock price synchronization. The relationship between the stock holdings of institutional investors and stock price synchronization is also related to the type of institutional investors’ holding behavior. The long-term stock holding behavior of institutional investors will decrease the stock price synchronization. The short-term stock holding behavior of institutional investors will improve the stock price synchronization.
Highlights
China’s stock market has developed for nearly twenty-five years
Using the data of the listed companies in the Shenzhen SME board market from 2011 to 2015, this paper demonstrates the relationship of the stock holdings of institutional investors, the dummy variables of long- and short-term holdings and the proxy variable of the stock price of listed companies in the SME board
This paper empirically studies the impact of the stock holdings of institutional investors on the synchronization of stock price in Shenzhen SME board market, empirically analyses the long-term and short-term stock holding behavior of institutional investors and researches whether institutional investors have a stake in the long-term or short-term holdings has an influence on stock price synchronicity
Summary
China’s stock market has developed for nearly twenty-five years. There is no doubt that we have made remarkable achievements. Through empirical analysis of the stock price index of the Shanghai Stock Exchange and the Shenzhen Stock Exchange, Qiao Yu [1] (1994) drew a conclusion that the reason of the cyclical abnormal returns of China’s stock market and the fluctuation of stock prices is that the Chinese stock market is not efficient Chengying He [2] (2001) proved that there is a plate phenomenon of stock price in the stock market of China. They have capital strength, risk tolerance and professional trading capability Their ability to obtain and interpret information is so strong that they play an important role in the stability of stock price. The result shows that China’s institutional investors actively participate in corporate governance, play a certain role in the supervision, maintain the stability of the capital market effectively and decrease stock price synchronization. The participation of institutional investors can improve the price fixing efficiency and stabilize the stock market
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