Research On The Liquidity Premium In Chinese Stock Market

Capital assets pricing theory is always the basis of the securities market theory, but the research on liquidity is relatively few and didn’t get enough attention. The traditional financial research theory usually have two basic premise, the market must be no friction, and does not have the transaction cost, so investors can keep buying&selling any number of securities, stock prices are not affected, this is on the assumption that the market liquidity for the premise of the infinite. But in reality, the ideal situation is not exist. In recent years, along with the liquidity risk leading to stock market crisis more and more frequently, people also pay more and more attention on it, this paper tries to research liquidity risk on the influence asset pricing from China, which as a representative of the emerging in the securities market.First of all, this article through VAR model of the impulse response and Granger causality causality test to examine the relationship between market liquidity and benefits. The empirical analysis shows that the yield is liquidity Granger reason, however, liquidity is not the yield Granger reasons; Liquidity and yield transfer effect mainly because the yield increasing driven liquidity change, in a sight to produce the effect of liquidity increases, at the same time, liquidity has many stages effects on yield. It shows that China’s stock market exist liquidity risk premium phenomenon in the asset pricing, we should consider the liquidity risk factors.Secondly, we use Amihud (2002) put forward views:the fluidity indexes down into the expected the index fluidity and not expected the index fluidity, collect and analysis the two groups time series of market returns and illiquid, through the GARCH-M model research the dynamic relationship between illiquid sequence and yield sequence, by introducing the liquidity wave sequence research the dynamic relationship between the illiquidity wave and the yield. The results show that the expected illiquid and the unexpected illiquid are respectively positive and negative correlation with expected return, and the liquidity range and expected return is also a positive correlation. For further,this give a reasonable explanation on China’s stock market liquidity for further risk premium to choose which way to compensate.The traditional VaR model does not consider the effect of liquidity and underestimate the risk, which brings some deviationthe to stock price, so, this article will introduce liquidity factor into share index risk measurement model (LVaR). The results indicate that:liquidity risk can down into exogenous liquidity risk and endogenous liquidity risk, the liquidity risk is a kind of not ignore risk factors, the introduction of liquidity risk measurement model is a more practical risk measure model, which better than the traditional VaR model and more accurate evaluation stock level of risk.Finally, this paper based on the signal analysis KRL establishes liquidity risk early-warning index system, and put forward the corresponding counter-measures of liquidity risk management. For a few years in our country in the future of the market’s summarized and prospect, and puts forward related Suggestions. Through the study found that in recent years, China’s stock market liquidity risk increases the possibility largely, the government should pay full attention to the liquidity risk and make effective warning on stock market liquidity situation in time.