Minimum Shareholding Proportion of Equity Funds and Stock Volatility Evidence from a Quasi-Natural Experiment

China’s fund market is getting bigger and bigger. By September 2021, the number of funds in the market had exceeded 8000, with a net value of nearly 24 trillion yuan. Among them, the number of equity funds has doubled compared with 2015, and the net value has increased four times compared with 2015,...

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Bibliographic Details
Published in:Security and communication networks 2022-06, Vol.2022, p.1-8
Main Authors: Wang, Tian, Zhu, Xintong
Format: Article
Language:English
Subjects:
Adjustment
Design
Empirical analysis
Equity
Equity funds
Feedback
Institutional investments
Literature reviews
Negative feedback
Securities markets
Stock exchanges
Volatility
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Summary:China’s fund market is getting bigger and bigger. By September 2021, the number of funds in the market had exceeded 8000, with a net value of nearly 24 trillion yuan. Among them, the number of equity funds has doubled compared with 2015, and the net value has increased four times compared with 2015, and it still maintains a rapid growth momentum. Do mutual funds play a role in market stabilization? To demonstrate this issue, we combined the passive trading technique with the positive and negative feedback trading strategies and explained how the minimum position ratio of equity funds affects stock price volatility. Then, using empirical data, we apply the difference-in-differences model to analyze how shifting proportions of the equity funds’ lowest shareholding affects stock volatility. The result shows that the volatility of high-institutional stocks was significantly reduced in comparison with other stocks after 2014. This result is further confirmed in the stocks held by large-scale funds. We used PSM-DID to solve potential endogenous problems and found that the results still support the hypothesis. This evidence supports the point of statement that the equity funds in the Chinese capital market can stabilize the market especially after 2014.
ISSN:1939-0114
1939-0122
DOI:10.1155/2022/1580589