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A Study On Liquidity Value Added In China's Securities Market

Posted on:2008-10-29Degree:DoctorType:Dissertation
Country:ChinaCandidate:S G LiaoFull Text:PDF
GTID:1119360215976867Subject:Finance
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Since 1980's, research on liquidity has been the foucs of modern micro finance. After clarifying the concept of liquidity and constructing liquidity compound measure indicator, this dissertation puts forward the concept of liquidity value added (LVA) based on the liquidity model of securities price difference, and then discusses the LVA and its influence factors with the data from China's stock market in detail. At the same time, umder the background of liquidity shortage in China's stock market, this dissertation also explores the real function of margin trading system on liquidity enhancement, and the empirical results provide the evidence for China's stock market in establishing margin trading system to enhance market liquidity. In general, this dissertation analyzes the securities LVA model, evidence of securities LVA and trading system of enhancing market liquidity. The main parts and conclusions of this dissertation are as follows:Firstly, this dissertation constructs the liquidity model of securities price difference to analyze the problem of securities premium based on the adjusted D-G-M model, and the model also puts the securities trading volume, securities liquidity and securities market liquidity into the price function. The model shows that stock liquidity and stock market liquidity are the fundamental factors influencing stock price,thus the model proves that securities LVA exists. And LVA is affected by such factors as securities liquidity, securities market liquidity and securities trading volume. According to the model, this dissertation also gives the method on how to calculate LVA. Additionally, this dissertation proves that stock marketability value also exists and its value is influenced by stock price volatility and restricted term.Secondly, based on the conclusions obtained from the liquidity model of securities price difference, this dissertation analyzes LVA and its influence factors with the data of block trading shares, dual-listed A-B shares and non-tradable transfer shares in China's stock market. The detailed results are listed as follows:1. The difference between the stock in block trading market and that in call auction market lies on the trading volume difference and the liquidity demand difference aroused by the trading volume difference, so the price difference between stock in block trading market and that in call auction market can be regarded as LVA. The empirical research on block trading stock reveals that LVA is remarkably larger than zero in Shanghai and Shenzhen stock market, and LVA is significantly affected by such factors as block trading volume, stock liquidity in call auction market, stock market liquidity in call auction market and stock price volatility in call auction market.2. The price difference rate between A-B share of dual-listed companies in Shanghai and Shenzhen stock market is very large before the B-share market opened to domestic residents in 2001. But in the following years, the price difference rate has decreased sharply and maintains a narrow scope. The relative liquidity of A-B share stock and relative liquidity of A-B share stock market can explain the A-B share price difference, so the results support the Liquidity Difference Theory on A-B share price difference. This dissertation also calculates the LVA of dual-listed stock with the explanation capability of liquidity factors, and the LVA is also very large before 2001, but it has decreased and keeps a narrow scope in the following years. The empirical research also proves that relative trading volume of A-B share is another important factor influencing the A-B share price difference.3. The empirical study on non-tradable shares transfer shows that the marketability value appears the trend of decreasing in the sample period. The marketability value in Shanghai stock market is a little less than that in Shenzhen stock market. Stock market liquidity affects marketability value significantly, while stock liquidity and stock price volatility have no significant effects on marketability value. Because the obvious segmentation of tradable shares market and non-tradable shares market, the trading features of tradable shares can not affect the non-tradable shares transfer price. In addition, the fundamental factors of listed company such as company scale, company performance and dividend level influence the marketability value remarkably.Thirdly, using the liquidity compound measure indicator, this dissertation analyzes China's stock market liquidity, and the result indicates that China's stock market liquidity is weaker than that of developed markets and other emerging markets. In other words, China's stock market liquidity is in the state of shortage. Then, this dissertation summarizes the changes of trading system in China's stock market, and examines the impact of trading system changes on market liquidity. The evidence indicates that trading system changes in China's stock market affect market liquidity evidently, and the loose trading system is apt to decrease the investor's transaction cost and increase market liquidity.Finally, based on the current situation of market liquidity shortage and the result that trading system affects market liquidity, this dissertation suggests that margin system be established in China's stock market to enhance market liquidity. And the empirical research with the margin trading data from Taiwan and Hong Kong stock market reveals that margin purchase can enhance market liquidity, while the short sale can not affect market liquidity because of the strict regulation. So the empirical results provide the evidence for China's stock market to establish margin trading system to enhance market liquidity.
Keywords/Search Tags:Liquidity, Liquidity Value Added, Liquidity Enhancement, Margin Trading System
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