Study On Investor Risk Attitudes In The Small-Medium Enterprise Board

The SME board is an important part of the Chinese multi-level capital market. As a transitional form of the GEM, the SME board can accumulate experience of construction and operational management for the GEM, and reduce the risk of the establishment of the GEM. Some different trading mechanisms and information disclosure system which are partly different from the motherboard have been implemented in the SME board. The differences of the trading mechanisms, the characteristics of the stock which are small shares, low liquidity, high level of volatility in the SME board, will affect the investor's risk attitude and behavior. It will help us to go deeply understand the SME board and gain experience for the establishment of the GEM.Based on the theoretical framework of market microstructure, we use MRR spread decomposition model on the stock listed in the SME board for a year or more and decompose the spread into adverse selection cost and the cost of processing orders. We study the relationship between spread, spread constituents and stock returns volatility and changes in volatility, and reveal the investor risk attitudes in the SME.The main conclusions are as follows: The bid-ask spread and depth for a stock are positively related to the volatility level of the stock return. The bid -ask spread will widen and the trading depth will arise in response to both increases and decreases in volatility. Adverse selection cost and the proportion of adverse selection cost in SPD will increase when volatilities are increasing and decreasing. The investors' trading behavior is sensitive not only to volatility but also to changes in volatility. The volatility and the change in volatility are better risk measure indicators.Contributions of the dissertation mainly include the following aspects. First, it systematically studies the Chinese SME board investors' risk attitudes under the risk environment based on volatility and the volatility difference of the stock returns. Second, it studies the proportion of transaction processing cost and adverse selection cost in SPD of the Chinese SME board by decomposing the bid-ask spread, and explains the causes of bid-ask spread. Third, it studies the relations between the proportion of adverse selection cost in SPD and the volatility and the changes in volatility. Fourth, it provides recommendations on GEM .