Research On Systematic Liquidity And Systematic Liquidity Risk Premium From The Perspective Of Market Quotations In China

Since the global financial crisis occurred in2008by the liquidity exacerbated, researchers given sufficient attention and do quantitative research on the liquidity risk management. Focused on the difference of market mechanisms on domestic and foreign markets, this paper discussed the systemic liquidity risk and its difference in the bull and bear market in China’s stock market.Firstly, based on the review of the relevant literature of liquidity and systemic liquidity, definition of systemic liquidity, systemic liquidity risk and systemic liquidity risk premium were given. This paper analyzed influencing factors, reviewed the bull and bear market in China’s stock market, pointed out the significance of study on systemic liquidity from the bull bear market perspective. Secondly, according to the definition of systemic liquidity, this paper verified the existence of systemic liquidity in the stock market in China by the co-movement model between a single stock liquidity and market liquidity. Furthermore, with the bull and bear market background, this paper studied the difference of systemic liquidity at different markets. At last, to study the systemic liquidity risk premium from both of the overall and sub industry perspective, the empirical model of systemic liquidity risk premium was constructed, and this paper estimated the liquidity risk premium under the bull and bear market respectively by the binary means model GARCH (1,1)-Diagonal BEKK model. From the overall results, the difference of the systemic liquidity risk premium under the bull and bear market is significant, and the liquidity risk management should in accordance with the current market. From the sub industry results, differences of systemic liquidity risk premium in the bull and bear market exist in all sectors, but due to the significant differences, risk management on specific industry or stock should considering the industry characteristics.This paper discussed the systemic liquidity risk in China’s stock market from the perspective of bull and bear market, hoping to study the systemic liquidity in a new perspective as well as provide new ideas for improve the existing financial risk management system.