Study On Liquidity Of Stock Market

Liquidity is the basis for the existence of the stock market. The liquidity of the stock market provides the possibility of trading for investors. It is precisely because of the presence of liquidity so that investors can increase his wealth without holding directly the physical assets, and to ensure that the investors in the time of need can realize their wealth at a reasonable price. In addition, the liquidity of the market is important to the quality of the market, the corporate governance of listed companies, and the investors' decision-making. Thus, the study of the liquidity of the stock market has a very strong practical significance.At present the domestic researchers often use the liquidity indicators that are based on market maker mechanism, but because of the different market mechanisms, these indicators do not necessarily suited to China's actual market. In the aspect of the relationship of the liquidity and asset pricing, the study abroad confirmed that the liquidity risk and the level of liquidity are both influencing factors of asset pricing, however, few domestic studies concern on the pricing of liquidity risk. In the measurements of the liquidity risk, most domestic researches intergrate the bid-ask spread to VaR model. But in our market mechanism, the bid-ask spread can't measure the liquidity risk totally. In addition, there are some limitations of the bid-ask spread indicators to separate exogenous liquidity risk from endogenous liquidity risk. To address the above issues of the researches of the liquidity, the paper's main work and innovation include those aspects.1. This paper constructs new liquidity measurement indicators of high-frequency data and low-frequency data. Different from other classifications, according to the frequency of data this paper divides the existing indicators into two categories. In accordance with this classification method, this paper creates new indicators of liquidity.2. When we inspect the relations of the liquidity and the proceeds at the market level, we study the impact of the level of liquidity and the fluctuations of liquidity in the proceeds separately. When we analyses the liquidity of the market index, volatility clustering is found to be significant. When the volatility of liquidity is introduced to the model, it has significant positive effect on the proceeds. This discovery accords with the study based on the market portfolio. This reflects the important influence of liquidity risk to the proceeds.3. This paper creates framework of measurement of liquidity risk based on illiquidity indicator Ill, and disassemble the liquidity risk into exogenous liquidity risk and endogenous liquidity risk. In addition, we use holding-period to control the endogenous liquidity risk, so that the model can reflect the impact of deposit of investors to the risk from the point of liquidity. The model has greater flexibility and better practicality.