| In any form of commodity market, liquidity is the most important thing about the healthy and stable development of capital market. So are the capital markets. In fact, liquidity is the basis for the existence of capital markets. The fundamental role of liquidity effect on stock market is to re-invest for the social and economy. Therefore, liquidity is the vitality of the securities market. If the market is lack of liquidity, it is difficult to complete the transaction, and then the market will lose the foundation for existing. In this sense, Amihud and Mendelson (1988) pointed out: "Liquidity is all for a market." If a market has good liquidity, it would be able to enhance investors'confidence, and keep the capital markets from the outside shockds.However, what is the relation of the liquidity and return or volatility of the securities? What indicators should be selected to measure liquidity? The problems have been proposed for a long time, but still not fully been resolved. Some scholars have gotten the some conclutions from a view of theoretical point by logic. Some scholars have gotten some conclutions by empirical analysis. A large number of studies on the liquidity have been done so that now people know more about the meaning of the liquidity of capital markets. However, theoretical modeling, due to different assumptions of scholars, the conclutions are not the same; because the different data, different econometric methods and different indicators of liquidity are used, the empirical analysis can also not get an exact conclution. Thus, this article from the perspective of theoretical and empirical analysis does some research about the relation of liquidity and yield and the relation of liquidity and volatility.The first chapter, the paper shows the background and meaning of the relation of liquidity and asset price and volatility. The paper also shows the importance of liquidity of asset portfolio. And then, the capter introduces the basic concept of liquidity and shows the important factors that can play impact on the liquidity. Following that, the capter introduces the main researches done by previous economicsts.The second chapter shows the methods of mearsurements of stock liquidity firstly. And then a forecast about liquidity is done by ARMA model. After that, I study the existence of systemic liquidity of China's stock markets.The third chapter is on liquidity and asset prices in the theory section, a brief review of the classic in the first quarter of the capital asset pricing theory, arbitrage pricing theory and multi-factor pricing theory, the following sections of the expansion of liquidity based asset pricing theory. The final section introduces the theory of implied liquidity analysis of equities.In the Chapter four, I do some researches about the relations of liquidity and yields by both static analysis and dynamic analysis. In static analysis, this paper uses the regression method. In static analysis, this article in accordance with different criteria were divided on the portfolio, through empirical research and analysis of the turnover, the amplitude and the effective flow rate indicators of excess liquidity yield relationship. In the dynamic analysis part, by using a variety of liquidity measures, VAR systems were set up to analyze the main variables of lagged terms of liquidity on the yield and the yield on the mobility of the delayed items and forecast the impact of variables.Chapter V introduces the relation of liquidity and volatility of securities. Two econometric models are used. One is dynamic regression model; the other is portfolio ARMA-GARCH model. By the two models, I get some conclutions about liquidity and volatility. Besides, I do some empirical analysis about the ability of forecast of the different kinds of models.Chapter VI concludes the main contents of the paper. I firstly introduce the basic ideas of the paper, and then I give some suggestions about how to use the liquidity. At last, I show some objects which can be studied in future. |
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