A Study On The Relationship Between Market Liquidity And China's Stock Market Crisis

On June 15,2015,the?cliff-style?stock market crisis is a real sense of market-oriented crisis,since the establishment of the Chinese stock market in 1990.The collapse of the stock market is often directly related to the serious lack of market liquidity,market liquidity will cause disastrous consequences to the whole market.Against this background,this paper is in the perspective of market liquidity to explore the impact of liquidity situation changes on the stock market,and study the relationship between market liquidity and stock market crisis.Firstly,this paper through reading literatures founded that mostly focus on the liquidity of explanation,division and measurement.Fewer research the relationship between market liquidity and stock market crisis.This provides a new perspective for the study of this paper,but it is also a study difficulty.Meanwhile,this paper serves the American stock market crisis of 1929,1987 and Taiwan stock market crisis of 1990,as case for empirical research.To explore the changing process of generation,acquisition and disappearance of market liquidity.Secondly,analysis of the formation process and causes of Chinese stock market crisis in 2015 from the perspective of market liquidity.This paper argues that the root of the Chinese stock market crisis in 2015 is the leveraged credit capital into the circulation of the stock market,resulting in market liquidity quickly disappear and leading to the stock market crisis.On this basis,this paper summarizes the theoretical logic structure of the formation of stock market crisis: external shocks and credit expansion-market panic and bubble burststock market crisis.Then analysis and comparison of the market liquidity measures.According to the actual development of Chinese stock market,selecting high-frequency data of 254 day degree from Shanghai stock market exchange from June 3,2014 to June 12,2015.Construct the indicators of market liquidity measures: turnover rate and relative bid-ask spread.Indicators of stock market volatility:the daily yield of Shanghai stock market.Empirical study on the impact of market liquidity shocks on stock market volatility,further analyze the causes of stock market crisis caused by market liquidity.Finally,putting forward some suggestion to optimize financial structure,establish verifiable leverage financing mechanism,and perfect regulatory framework.