Study On Liquidity Of Chinese Stock Market

The ultimate objective of stock market is to supply opportunity for investors to transfer stocks, that is to say, increasing the stock liquidity. The liquidity is very important in pricing financial assets. If some financial assets are lack of liquidity or no liquidity, not only their value will be underestimated, but also no people like to hold them. Liquidity is the foundation and precondition of stock market. If stock market loses the deal contract standing for liquidity, it will disappear and translate the contract behavior between individuals.Considering the significance of liquidity to stock market, and China stock market's initial stages, this article empirically studies the liquidity characteristics of Shanghai and Shenzhen stock market, in order to put forward some useful thoughts for the improvement of China stock market.The study on financial market microstructure theory is mature, and at present it transfers to empirical research period. But most studies focus on the quote-driven market in Europe and America; studies on order-driven market are just beginning. China stock market was established in the 1990's and in its initial developing stage, studies on the liquidity of China stock market just appear recently, which merely consider one characteristic of liquidity. For the multiattribute of liquidity, and no unitive method to measure liquidity, the conclusions may be lack of veracity from liquidity study with just one index. Based on the above, the article studies completely the liquidity of China stock market with the method of index system, including short-term liquidity study and long-term liquidity study. The short-term liquidity study is to analyze the short-term liquidity and its affecting factors by analyzing the intraday pattern of spread and depth and their affecting factors. As market microstructure theory consider, the spread and depth of stock market are affected with price, volume and volatility. The article tests the effect of company scale on liquidity besides the former factors, because different company scale and different investors' preference may lead to different stock liquidity. The long-term liquidity study mainly analyzes the movement characteristics of year liquidity in Shanghai and Shenzhen stock market, also their diversity and linkage between them, with the method of index system consisting of tureover rate and Martine index, for turnover rate and Martine index reflect the following attributes of liquidity: immediacy, width and depth. Considering the limitation of Martine index, the article makes an improvement for it and eliminates its original limitation.The conclusions are as follows:...