Liquidity Risk And Stock Returns

Liquidity risk is unanticipated changes in liquidity, and liquidity is the ability ofinvestors in the stock market quickly execute transactions specified assets, liquiditycomparison is relative. Impact of liquidity risk on the stock gains achieved through twochannels, one of liquidity and stock returns deviate from the mean deviation of the meancommon, you can use the liquidity and stock returns covariance to represent; Second volatilitymobility itself in general, we assume that investors are risk averse, they will hate liquidityfluctuations, and thus for greater mobility volatility stocks, rational investors will require ahigher risk of income corresponding compensation. This variance can be used by itself toindicate the flow. So Liquidity risk includes two aspects, one is the liquidity and stock returnscovariance; Second, the variance of mobility itself. However, existing research studies theimpact of which on the one hand but on stock returns, therefore, this article will combine itsrelationship with stock returns variance both liquidity and stock return covariance andmobility itself.Furthermore, considering the variability of liquidity risk. Capital Asset Pricing ModelCAPM total risk-return portfolio of individual securities or the decomposition of some of therisks and market changes synergistic combination that systemic risk and its own unique risksthat non-systematic risk, modeled on this idea, we consider variability of liquidity risk, furthervolatility to liquidity risk Liquidity risk is decomposed into fluctuations and fluctuations inmarket liquidity fluctuations in that part of the collaboration, called the risk of systemicliquidity fluctuations; while the volatility and market liquidity liquidity risk is independent offluctuations, called the risk of non-system liquidity fluctuations. Further investigate the effectsof each Liquidity Risk Systemic effects of volatility on stock returns and non-systemicliquidity fluctuations on stock returns.In research methods, empirical testing methods used by various scholars mostly used to build equity portfolio, thereby using cross-sectional regression methods. In this paper, takinginto account the liquidity risks change over time and change with time variability. Furtherempirical test can be considered from the perspective of time series. Therefore, this paperthrough the various parts of the decomposition of stock returns and liquidity risk way to testthe relationship between the empirical time series over.Firstly, the relationship between risk and liquidity of the stock received and on the basisof the existing theories on the relationship between liquidity risk and stock returns oftheoretical analysis and empirical models constructed on this basis. We will decomposeliquidity risk volatility fluctuations systemic liquidity risk and non-systematic liquidity riskand market volatility related to overall liquidity and liquidity risk are combined withcovariance measure liquidity and stock returns together, they were obtained time-series data,and then using the method of time series, the system analyzes the relationship betweenliquidity risk and stock received. In order to consider the impact of equity division reform ofliquidity risk and stock gains relations, we will sample data in December2007for the sectoris divided into two sample interval, respectively empirical test. Empirical results show thatthe covariance measure of liquidity and liquidity risk of stock returns positively correlatedwith stock returns over the entire data sample interval, and liquidity risk volatility of stockreturns before2008did not explain the force after2008liquidity risk of volatility in systemicliquidity risk and volatility of stock returns positively correlated with the risk of non-systemicliquidity fluctuations negatively correlated with stock returns...