The Analysis On The Existence Of Liquidity Black Holes And Induced Factors

The financial crisis is often associated with the occurrence of liquidity black holes, which makes the academic circles start to pay attention to this phenomenon. The high homogeneity of China's interbank bond market provide the realistic basis of the liquidity black hole, which also makes the domestic scholars further their concerns of the liquidity black hole problem in the inter-bank bond market.In this paper, the existence of liquidity black holes and induced factors in China's inter-bank bond market has been theoretical analyzed and empirical tested. The theoretical analysis shows that, although China's inter-bank bond market liquidity has improved, the scope of market participants have been expanded, the actual market trading members has a higher homogeneity; the possibility of liquidity black holes in this market is very large, the induced factors may include market diversification, market risk and macroeconomic policy adjustment. Through the establishment of two-variable regression model with the change in bond yield and transaction, using the panel data in China's inter-bank bond market, the empirical test has been done on the liquidity black holes in the market. The results showed that, changes in bond yields and trading volume showed a positive autocorrelation, trading volume changes led reverse change in current yield, delayed changes in yield also has a negative effects of the current trading volume, liquidity black holes in China's inter-bank bond market existed. On this basis, induced factors have been induced as adjustment variables and an empirical test has been done. The results show that, the market diversity and market risk are two significant induced factors on the existence of liquidity black holes in China's inter-bank bond market, of which, the lack of market diversity id is the core element of the liquidity black holes. In this study, the paper attempts to make useful suggestions to our financial institutions and regulators how to avoid the risks of liquidity black holes.