An Empirical Research On Investors Risk Attitude Of GEM Based On High-frequency Trading Data

The GEM board is an important part of the Chinese multi-level capital market,It officially opened in 2009 October,it mainly provides the financing way and growth space for the small & medium enterprises and high-tech industry enterprise.GEM is a stock market which characters are low threshold,high risk and strict regulation and also the cradle of the growth of enterprises. The stock price fluctuation characteristics of high level have a certain impact on the risk attitude of investors and their investment behavior,so this study will help us more in-depth understanding the GEM and provide relevant suggestions for the development of GEM.This paper is based on the market microstructure theory and according to the high-frequency trading data of 30 GEM stocks from 2012 June to 2013 May.lt makes descriptive statistics for the relationship between the spread,depth and stock returns volatility and changes in volatility.at the same time, I use LSB spread decomposition model to decompose the spread into adverse selection costs,order processing costs and order persistence costs,and make empirical research on the relationship between the decomposition of the spread and the stock returns volatility and changes in volatility to systematically reveal the investor risk attitude of in the GEM.This paper is not starting from the investor’s individual rationality,but based on all of the traders formation of limit order book---bid-ask spreads and depth to disscuss the relationship of them.The main conclusions are as follows:the bid-ask spread and transaction depth are positively related to the volatility level of the stock return;market depth are negatively related to the volatility level of the stock return;when volatility is increasing,the bid-ask spread and transaction depth is expanding;when volatility is decreasing,the bid-ask spread and transactions change little;The adverse selection costs and order persistence costs are negatively related to the changes in volatility,and the relation between order processing costs and changes in volatility is positive;volatility and stock return volatility difference can be good indicators of risk;and at last give the advice to perfect and develop the GEM board.