Research On Price Discovery In China's Capital Market From The Perspective Of Market Microstructure Theory

The price discovery in the capital market is the focus of the entire financial theory development process.We use the rational expectation equilibrium analysis framework to characterize the price discovery process in the capital market under different conditions from the common market environment of liquidity shock,leverage constraints and information asymmetry in China.Then we analysis the impact of microstructures on the price discovery efficiency.Finally,we designed the corresponding empirical research to test the hypothesis under the above theoretical framework.Firstly,this paper uses the ultra-high-frequency tick-by-tick data of the limit order book to characterize the relationship between liquidity and volatility from a more microscopic perspective,and analyzes the impact of different quotations in the order book on price discovery efficiency.Research shows that measuring liquidity can not only rely on depth,but also comprehensively consider the distribution of pending orders on different quotations in the order book.When the amount of pending orders on the visual quotation is large,it does not mean that the overall liquidity supply is sufficient at this time.Therefore,the trader's misjudgment of the overall distribution of liquidity may also be one of the reasons for the frequent shortage of liquidity in China's stock market,which in turn leads to a severe impact on price discovery efficiency when liquidity shocks occur in the market..Secondly,we propose a comparative hypothesis for the difference between China and Western mature markets as emerging capital markets.We examine the relationship between the overall liquidity of the market and the profitability of arbitrage trading,and then study the price discovery efficiency of the China's market from the perspective of whether the arbitrage trading can effectively weaken the market anomaly.Through research,it is found that arbitrage trading is still difficult to effectively play its role in correcting mispricing due to the improvement of liquidity and the fact that the follow-up trading behavior has aggravated the market anomaly.The results suggest that the price discovery efficiency of China's stock market is still low,and the market mechanism is still not mature enough.Last but not least,this paper further integrates a deeper influencing factor—asymmetric information—into the analysis framework,and conducts in-depth research on the impact of price discovery efficiency in the environment of information asymmetry.Based on the degree of investor perception,the empirical research explores the causes of price delay under asymmetric information circumstances for the first time,clarifies the relationship between investor perception,information asymmetry and price delay,proves that information asymmetry will reduce the efficiency of price discovery,and identifies partial mediating effect of information asymmetry on price discovery efficiency through testing.Finally,according to the research conclusions,we suggest a series of policy recommendations that help to improve the efficiency of price discovery in China's stock market,which points out the direction for deepening the reform of market mechanism.At the same time,it points out the shortcomings in the paper and the prospects for future research ideas.