Study On The Measurement And Management Of Liquidity Risk In China's Securities Market

Stock market's liquidity and liquidity risk are important parts in the modern micro financial fields. This thesis chooses liquidity risk in China's stock market as the research object. Firstly, we analyzed the implication of liquidity risk and pointed out that"liquidity risk means the uncertainty of liquidity's change in the future", volatility is a good way to capture this character in academic. The thesis put up with a method to measure the liquidity risk by using of the conditional variance theory. With the background of Chinese financial market, we discussed the factors which influenced the liquidity risk of China's stock market. Liquidity risk, which occurs at your buying or selling the assets, is different to other financial risk, it's a trading risk. This paper mainly considered the interday liquidity risk, and the intraday liquidity risk was a useful supplement. The world-wide financial crisis broken at 2008, which made most of the investors and especially the fund manager realize the importance of managing the liquidity risk. In the rising process of asset price, investors often ignore the asset's liquidity risk, but when there is a sudden drop or even a panic, the mutual fund managers have to sell off the stocks they are holding to cope with the investor's redemption, a large amount of transaction certainly will strike the stock's price, which increased the portfolio's liquidity risk. Measure and manage the assets or portfolio's liquidity risk exactly are very instructive.The main parts and conclusions of this dissertation are as follows:Firstly, after clarifying the concepts of liquidity level and liquidity risk, this dissertation analyzed the meaning of liquidity risk. Based on the presented liquidity risk measurement theory, the thesis probes a method to measure liquidity risk, which is fitting for China's order driven stock market. The thesis studied the volatility characteristic and measured the interday liquidity risk of China's stock market by use of the conditional variance method. Secondly, this dissertation analyzed the main factors qualitatively, which have impaction to the liquidity risk, combing the features of China's Stock market, Such as, investor's structure and behavior, adjustment policy of macro-economy, and stock market's volatility. Furthermore, this paper composed property model and empirically studied the influence of these factors to the market's interday liquidity risk.(1)Transition of investors'structure to market's liquidity risk. Through a dummy variable in TGARCH model, the empirically study found that: the institutional investor leading market had a notable lower market liquidity risk. (2) Do policy factors, such as benchmark interest rate, reserve ratio and stamp duty's adjustment, have any impaction on the market's liquidity condition? Through a proper dummy variable in EGARCH model, the empirical study show that, in the first week after the policy news announced, the liquidity risk increased notably. (3) In the stock market crisis, market risk and liquidity risk help each other,upward spirally. By use of the dynamic conditional correlation (DCC) model, it was found that, after the financial crisis broken out, the correlation of market risk and liquidity risk increased.Thirdly, Value at Risk is a new method to measure and manage financial risk, it's easy to understand the risk that a portfolio is bearing by use of a digit. Based on Risk Metrics'moving average model and conditional variance method, the thesis dynamically computed the VaR of market's liquidity risk,and used kupiec's failure ratio to test it's validity. Under the extreme conditions, financial time series always have much thicker tail data, the liquidity risk of a portfolio could be underestimated, which brings about non-necessary loss to the investors. By modeling the tail of assets'return series, extreme value theory can be used to analyze and explain the extreme events, which is a method to measure down-half loss in the extreme condition and can be exactly describe the quantiles of distribution. Block maxima method (BMM) and peaks over the thresholds are two common methods in the extreme value theory, the thesis used these methods to study the tail behavior of the liquidity change series and estimate the parametrics, computed the VaR of liquidity risk and proceeded corresponding effectiveness test.Forthly, the dissertation researched the appliance of liquidity risk combing with the China's stock market. Three contents were considered: (1) Whether liquidity and liquidity risk affect the assets'return or not is a popular topic in the academic, but there isn't a coincident result. So this paper studied the correlation among return, liquidity and liquidity risk by choosing panel data's regression method. (2) The information arouse volatility of one market can spill over to another related market, that is volatility spillover effects, based on the multivariate GARCH-BEKK model this thesis studied the liquidity risk spillover effect among American, Hongkong and Shanghai stock market. (3) In the background of financial crisis, manage the fund's liquidity risk is a main task for fund's manager. But the presented literatures for mutual fund's performance evaluation ignored the liquidity risk, the paper tried to put up with a valuation method based on liquidity risk adjustment.At last, intraday liquidity risk reports the initiative of the investors'trading, the dissertation measured and charactered the intraday liquidity risk, and studied the source of liquidity risk from the view of investors'strategy game when the market was suffering a strike; This paper put up a method to measure the intraday liquidity risk based on the time division data and trader by trader data;The seller and buyer could have totally different liquidity level in some stage, the thesis distinguished notion of the seller and buyer's liquidity and studied the relation between stock's price and the unbalanced liquidity level of investors. Furthermore, the dissertation put up with an intraday liquidity risk composite measure index, which is containing the liquidity's four dimensions, i.e. bread, depth, resilience and waiting time and studied its traits, such as, autocorrelation and state dependence and measured the value of intraday liquidity risk based on the trader by trader data using the time varied variance method.