| Since last century,global stock market crash happens more frequently than ever,and the scope of influence becomes much wider.Stock market crash will not only cause huge wealth damage to investors,but also discourage their confidence.As to the financial system,stock market crash will severely damage the stability of the whole system and hinder the resource allocation function of finance.This paper focuses on the Chinese stock market crash in 2015,and analyzes the influence of stock crash risk on stock pricing process,using which as an entry point to discover the underlying mechanism of the stock market crash in 2015.Traditional capital asset pricing models are based on mean-variation dimensions,which have failed to descript the characteristic of "continuum"on the situation when stock price crashes.This paper adds time dimension variable into the model,compares different crash risk index according to the particularity of Chinese stock market and increases the accuracy of descripting excess return on extreme market conditions by constructing four factor model which contains market return,crash risk,market size and market-book ratio.Using a sample of A-share listed firms in China for the period 2011-2016,the results show that the stock crash risk does significantly influence the excess rate of return,and the correlation between these two variables are significantly negative.When stock market crash begins,the crash risk of individual stock significantly increases.During that period,the investors’ absolute risk preference decreases,which leads to the sell action of individual stock under the crash risk increasing situation.At the meantime,the relative risk preference of investors has changed.Comparing to the small size firms,investors are more willing to hold big size firms’ stock,which forms the order of sell action.But when stock market crashes,most small size firms’stock price fell to the down limit or even get into trading halts intentionally,which cause a sever liquidity disaster.As the institutional investors’ liquidity demand can not be realized,the sell action spreads to big size firms instantly.So government should reinforce the education of stock market participants and advocate the idea of rational and value investing,as well as setting up“Stock Market Stabilization Fund" to offer sufficient liquidity when stock market crashes. |
