The Study Of Stock Market Volatility Impact By Release Of Non-tradable Shares

Reform of non-tradable shares occurred in2005is a major change to Chinese stock market, for it have changed the situation of non-tradable. With the most listed companies complete the reform of non-tradable shares, the original non-tradable shares could obtain the right of trade by paying consideration, thus caused fears:the one, it would make market investors emerge an expectation that market expansion will aggravate burden of the stock market, and produce pessimism, thus affecting the stock market; the other one, the reduce holding behavior could increase the actual stock supply, produce stock market fluctuation.But the behavior of reduce holding affected by complex factors, based on the descriptive statistics analysis of the data of non-tradable shares, found actually only3%holdings have been reduced; and from industry perspective, reduce ratio is significant different between industries, the highest is the industry of other manufacturing, about20.2%; the lowest is only0.36%in industry of finance and insurance.Last, from two aspects to study whether the release of non-tradable shares impact the stock market. First, using event study analyze that whether the event of release caused short-term and long-term shock on the stock market. Then using GARCH model research the change of volatility before and after release. Research shows that there appear negative abnormal returns before the release, it means that the pessimistic expectation moods of market investors affects the stock market. In the short term after the release, the negative abnormal returns in stock market is significant, this was closely linked with the behaviors of reduce holding, in long-term the negative abnormal returns gradually disappear, the stock market went back to stable state. By adding a virtual variable into the GARCH model, we could find that the event of release caused a significant positive effect on stock market volatility in short-term, it means that short-term volatility intensified, but in the long term the influence of volatility is not significant.