Research On The Relationship Between Liquidity And Returns Of Shenzhen SME Board

Recently, with the economic development of the word, stocks are developing between different areas. Stock market risk is becoming increasingly obvious, and research on the relationship between liquidity and returns of the stock market are becoming more and more import.There are many researches on the relationship between liquidity and returns abroad, and the theories are mature, market at home emerges so late, although it has been developed continuously, there are some different characteristics in the market. Many mature theories abroad can not used in the market, and there still has no agreement on the relationship between liquidity and returns in the stock market at home.We choose 577 stocks from Shenzhen SME board, use trading data between 2004 and 2010 as the research objects. We established a model to study the relationship between liquidity and returns in China's stock market. To measure liquidity of stock market comprehensive, we choose Turn over and Martin flow rate. Use ROI to measure stock returns. Use Market Microstructure, Asset Class, Investor Sentiment and Assets net profit margin as controlled variable.After doing research on this, we find that these ratios have statistically significant linear relationship with stock returns. These are all influence the stock returns. Returns are inversely related to liquidity, firm size and Assets net profit margin, positive correlation to Investor Sentiment.The author believes that returns is inversely related to liquidity, this conclusion will help our authority to take measures to protect stock market, and is of great significance to our stock market.