A Market Test of the Fund s Investment Behavior: Empirical Study Based on the Biggest Institutional Investor of China Stock Market Yi Yao& Zhiyuan Liu (Business School, Nankai University, Tianjin, 300071 ),300071 EMAIL:mailto:yaoyi88@126.com mailto:yaoyi88@sohu.com TEL022-23698171022-81566627 EMAILmailto:zhiyuanl@public.tpt.tj.cn TEL13502122628
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1 2 3 Who Blinks in Volatile Markets, Individuals or Institutions? 2
2 600 500 400 300 200 100 0 100% 80% 60% 40% 20% 0% 2001Q1 2001Q2 2001Q3 2001Q4 2002Q1 2002Q2 200Q03 2002Q4 2003Q1 2003Q2 2003Q3 2003Q4 3 50 1 3
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1 2 1975 13f SEC 6
Fama-MacBeth 0 1 1 Fama-MacBeth Fama(1976) 7
Ln(Z) 1-3 1 Turnover ratio = β 0 +β 1 Ln(Z) + β 2 Share ratio + 1 2 Return = β 0 +β 1 Turnover ratio +β 2 Ln(Z) + β 3 Share ratio + 2 3 VAR =β 0 +β 1 Return +β 2 Turnover ratio +β 3 Ln(Z) +β 4 Share ratio + 3 1 25 75 Return -0.02202-0.00189-0.00040-0.00022 0.00129 0.01563 0.00280 2013 VAR 0.00003 0.00021 0.00036 0.00044 0.00056 0.01866 0.00053 2013 Share ratio 0.00002 0.01490 0.03803 0.06621 0.08738 0.60791 0.07967 2013 Ln(Z) 7.19313 7.88536 8.08382 8.11058 8.30103 9.65147 0.35429 2013 Turnover ratio 0.00101 0.00462 0.00722 0.00955 0.01150 0.12592 0.00834 2013 0.00002 0.60791-0.00022 0.00044 0.00955 1 A 8
2 1 t Ln(Z) 0.00017 0.5233 0.0103-0.0052 Share ratio 9.2777*** 0.019-0.009 2 t Turnover ratio 0.0565 7.78*** 0.1737-0.115 Ln(Z) 0.0002 3.219** 0.0018-0.001 Share ratio 0.0003 1.9184* 0.0032-0.0036 3 t Return -0.0096-1.7693 0.1601-0.1258 Turnover ratio 0.0198 16.5491*** 0.0624 0.0105 Ln(Z) -0.0001-4.1127*** 0.00005-0.0011 Share ratio -0.0003-8.9506*** 0.0001-0.0012 3 Share ratio 1 2 3 2000Q4 0.01475*** -0.0027** -0.00009 3.812-2.286-0.764 2001Q1 0.00489-0.00137-0.00008 1.412-1.306-1.077 2001Q2 0.00917* -0.00053 0.00003 1.916-0.333 0.227 2001Q3 0.00912** -0.00033 0.00006 1.731-0.18 0.351 2001Q4 0.00425 0.0008-0.00054* 0.367 0.293-1.713 2002Q1 0.00172-0.0036** -0.00046*** 0.313-2.431-3.294 2002Q2 0.00023 0.00128-0.00013* 0.04 0.912-1.758 2002Q3 0.0046 0.00216-0.00052*** 1.16 1.113-4.127 2002Q4 0.019*** 0.00092-0.00021** 3.127 0.712-2.476 2003Q1 0.01729* 0.00223-0.00009 1.94 1.297-0.210 2003Q2-0.00087 0.00194** 0.00002-0.237 2.118 0.269 2003Q3-0.009 0.0032* -0.00116-1.11 1.728-1.197 *10%**5%***1% 9
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R it AR it R it = α +β i R i mt + ε it R i t it R mt ε it Rˆ it = αˆ i + βˆ i R mt Rˆ it AR it = Rit - Rˆ it AR it ATit T it HZi T it i t HZi i ATit ARit ATit Rit 11
Tit i i Ln(Z) AR it = γ 0 + γ 1 Var i + γ 2 Share ratior i + γ 3 Ln(Z) i + γ 4 Beta i + γ 5 T it + i A AT it = γ 0 + γ 1 Var i + γ 2 Share ratio i + γ 3 Ln(Z) i + i B 1-4 1 AR it = γ 0 + γ 1 Var i + γ 2 Share ratio i + γ 3 Ln(Z) i + γ 4 Beta i + γ 5 2 AT it = γ 0 + γ 1 Var i + γ 2 Share ratio i + γ 3 Ln(Z) i + γ 4 HZ i + i 3 R it = γ 0 + γ 1 Var i + γ 2 Share ratio i + γ 3 Ln(Z) i + γ 4 Beta i + γ 5 4 T it = γ 0 + γ 1 Var i + γ 2 Share ratio i + γ 3 Ln(Z) i + γ 4 HZ i + i AT it + i T it + i 1 2 3 4 1 A 12
AT i 0.01287 0.00243 4 0 Beta i 0 Beta i Beta i 1.032 1.021 ARit 1813-0.08841 0.07226-0.00049 0.01954 ATit 1813-0.02285 0.34226 0.01287 0.02146 Var i 1813 0.00006 0.00160 0.00045 0.00019 Share ratio 1813 0.00002 0.59583 0.06159 0.07366 Beta i 1813 0.13845 1.65151 1.03218 0.19406 HZ i 1813 0.00149 0.02818 0.00586 0.00306 Ln(Z) 1813 5.47756 7.70794 6.18821 0.28087 Rit 1813-0.05713 0.10099 0.05064 0.03096 Tit 1813 0.00035 0.35123 0.02035 0.02527 ARit 1687-0.07489 0.09551-0.00075 0.02245 ATit 1687-0.02408 0.15985 0.00243 0.01222 Var i 1687 0.00000 0.00160 0.00041 0.00018 Share ratio 1687 0.00004 0.49834 0.06093 0.07037 Beta i 1687 0.13845 1.65151 1.02097 0.20930 13
HZ i 1687 0.00000 0.02818 0.00702 0.00358 Ln(Z) 1687 5.47756 7.32897 6.20623 0.26769 Rit 1687-0.10035 0.06941-0.04084 0.02451 Tit 1687 0.00038 0.25292 0.01075 0.01637 20011023 1642.22 1670.56 1670.74 1625.15 9.86% 20020624 1704.70 1707.31 1709.07 1647.50 9.25% 20020131 1413.22 1491.67 1501.33 1413.22 6.81% 20020123 1355.86 1444.97 1445.70 1346.17 6.35% 20030114 1386.90 1466.85 1476.91 1386.59 5.81% 20020606 1458.61 1521.26 1532.74 1455.31 4.05% 20010801 1925.24 1986.93 1986.94 1925.24 3.47% 20030428 1483.47 1537.69 1538.59 1473.27 3.40% 20011012 1637.75 1691.33 1700.71 1598.79 3.24% 20031222 1444.17 1492.96 1493.54 1441.59 3.23% 20031124 1360.33 1404.01 1404.25 1360.23 3.12% 20020621 1517.28 1562.72 1564.92 1517.26 3.07% 20020521 1575.02 1588.11 1599.11 1564.55 3.02% 20030108 1331.44 1372.07 1373.12 1330.45 3.00% 20020128 1444.50 1359.55 1448.60 1357.55-6.33% 20010730 2056.76 1956.82 2056.77 1955.97-5.27% 20011107 1669.43 1594.05 1669.46 1591.77-4.62% 20020117 1476.36 1419.52 1476.38 1416.30-4.06% 20010806 1953.41 1882.13 1953.45 1867.86-3.91% 20010115 2097.09 2032.44 2097.09 2030.29-3.44% 20020121 1407.00 1366.97 1412.21 1362.62-3.42% 20011010 1744.04 1686.61 1744.64 1683.71-3.33% 20011022 1558.47 1520.67 1563.40 1514.86-3.29% 20020114 1519.93 1485.11 1519.93 1484.46-3.29% 20010827 1881.31 1827.25 1881.31 1824.88-3.16% 20020516 1592.24 1549.50 1592.24 1546.94-3.06% 20030513 1533.08 1485.31 1534.80 1481.75-3.04% 14
1 γ 0 Var i Share ratio Ln(Z) Beta i R 2-0.0105-1.000-0.0989*** -7.471 6.2603** 2.463 1.7380 0.554-0.0095* -1.653 0.0127* 1.695 0.0027*** 4.033-0.0327*** -13.422 0.1911*** 9.492 0.0049*** 0.0256*** -0.0609 5.675 9.640-1.390 0.149 64.663 0.064 23.919 2 γ 0 Var i Share ratio Ln(Z) R 2-0.0184 16.8004*** 0.019*** 0.0015** 0.2643-1.605 6.124 2.835 1.893 1.581 0.0026 0.378 2.1885 1.267 0.0176*** 4.237 0.0001 0.125 3-0.4387*** -4.999 12.793 0.021 γ 0 Var i Share ratio Ln(Z) Beta i R 2 0.025 0.6947-0.0397*** 0.0007 0.0116*** 0.5913*** 0.187 83.421 1.555 0.175-4.433 0.291 3.065 19.167-0.1021*** 6.4186* 0.0161* 0.0118*** -0.0143*** -0.0603 0.0375 14.123-7.006 1.857 1.937 5.355-4.884-1.253 4 γ 0 Var i Share ratio Ln(Z) R 2-0.0175 17.2556*** 0.0188*** 0.0033* 1.2307*** 0.060 30.177-1.522 6.2423 2.798 1.813 7.322 0.0026 2.1885 0.0176*** 0.0001 0.5613*** 0.039 18.314 0.378 1.267 4.236 0.125 6.395 *10%**5%***1% AR it = Rit - Rˆ it 2 15
12 2. 3 2 34 12 1 3 4 12 1 16
199610 200110 6 Christophe Faugère and Hany A. Shawky, 2003, Volatility and Institutional Investors Holdings During a Declining Market: A Study of NASDAQ during the Year 2000, Center for Institutional Investment Management University at Albany 7 Ferson, Wayne, and Rudi Schadt, 1996, Measuring fund strategy and performance in changing economic conditions, Journal of Finance 51, 425-462. 17
8 Gompers, Paul A., and Andrew Metrick, 2001, Institutional Investors and Equity Prices, Quarterly Journal of Economics 116, 229-259. 9 Grinblatt, Mark, Sheridan Titman, and Russ Wermers, 1995, Momentum investment strategies, portfolio performance, and herding: A study of mutual fund behavior,american Economic Review 85, 1088-1105. 10 Kraus, Alan, and Hans R. Stoll, 1972, Parallel trading by institutional investors, Journal of Financial and Quantitative Analysis 7, 2107 2138. 11 Lakonishok, Josef, Andrei Shleifer, Richard Thaler, and Robert W. Vishny, 1991, Window dressingby pension fund managers, American Economic Review 81, 227 231. 12 Nofsinger, John R., and Richard W. Sias, 1999, Herding and feedback trading by institutional investors, Journal of Finance 54, 2263-2316. 13 Patrick J. Dennis and Deon Strickland, 2000,Who Blinks in Volatile Markets, Individuals or Institutions?, Dice Center Working Paper No. 2000-7 14 Pettengill, G. N., Sundaram, S., and Mathur I. March 1995. The Conditional Relation Between Beta and Returns. Journal of Financial and Quantitative Analysis 30(1):101 116. 15 S.G. Badrintath and Sunil Wahal 2002, Momentum trading by institutions, journal of finance, December,2449-2475. 16 Sias, Richard W., 1996, Volatility and the Institutional Investor, Financial Analysts Journal, March/April, 13-20. 17 Wermers, Russ, 1999, Mutual fund herding and the impact on stock prices, Journal of Finance 54,581-622. A Market Test of the Fund s Investment Behavior: Empirical Study Based on the Biggest Institutional Investor of China Stock Market Yi Yao& Zhiyuan Liu (Business School, Nankai University, Tianjin, 300071 ) Abstract: In the unique institution background of China stock market, the fund holdings are high similarity. The authors make the empirical study of the fund top 10 heavily holdings in China from 2001 to 2003. Then find the fund as the biggest institutional investor of China stock market really increases the liquidity and return of stock holdings and decreases the volatility of stock holdings. But because the high concentration of funds top 10 heavily holdings, the liquidity risk of stocks has appeared. On the other hand the authors find in the big rising days the funds sold their stocks, in the big falling days the funds sustained 18
their stock prices. Then we can see in the big trading days China funds performed inversely compared with United State mutual funds. China funds used negative feedback trading strategy but really decreased the volatility of the stock market. Based on institution structure of China stock market, the authors think the funds had no choice but to invest like this. Key Words: fund, investment behavior, institution investor, empirical study 19