Research On Liquidity Of The New Third Board Market

The New Third Board market(NTBM)has been developed well presently.In December 2018,there were 10,733 listed companies in the market with a total market share of 634.814 million shares,an average daily turnover of 328,905,300 yuan and 9,636,280 shares.However,asthe market develops actively,many problems have been exposed and encountered.Among them,the liquidity problem is the most obvious.According to Choice statistics,the average daily turnover rate of the Shanghai securities market in 2018 is 2.39%,the Shenzhen main board market is 1.33%,the small and medium board market are2.61%,and the GEM market is 3.86%.While the NTBM is only 1.39%.Not only the liquidity of the NTBM is low,but also the structure is seriously divided.80% of the market transactions are performed by 20% of the market.And there are a large number of zombie stocks in the market.Liquidity is an important indicator of market efficiency.Abundant liquidity can meet the trading needs of market participants,and it can enable funders to integrate fundsquickly and efficiently.Schwartz(1988)pointed out that liquidity wasone of the most important factors reflecting market quality.The market maintainingmoderate liquidity can reduce transaction costs and improve operational quality.Pa ?stor and Stambaugh(2003),Brunnermeier and Pedersen(2009)and other scholars said that the most direct cause of the financial crisis is the sudden decline of financial market liquidity.On May 6,2010,the US stock market suffered a flash crash and the market liquidity disappeared.In 2013,the Everbright Oolong incident caused the Chinese stock market to fluctuate greatly.Investors were quilted at the high level and the market liquidity almost disappeared whenthe stock price fell down.From June to August in 2015,the Shanghai Composite Index plunged from 5178 points and fell by 45% in 53 consecutive trading days.The huge market value evaporatedin the moment.In January 2016,the fuse mechanism,whichwas only suspended for 4 days,was overkill.The market liquidity disappeared and the entire stock market became vulnerable.In order to improve the liquidity of the NTBM,the government has issued a series of related policy measures.Such as the market maker trading system was introduced on August 25,2014,the tiered system was introduced on June 27,2016,the asset statistics of individual investors were enlarged on July 1,2017,which reduced the individual investors' entry barrier.These policies have improved the New Third Board market to some extent,but theeffects weremixed and needed to be verified.This paper focuses on the characteristics of liquidity forthe New Third Board market.The liquidity premium and the impact of government policies on market liquidity were analysed.The main contents and structure are as follows:First,it definedthe measurement methods for the liquidity and the liquidity risk in the NTBM.This paper systematically introducedthe measurement indicators of stock liquidity and liquidity risk.Based on these,the effective flow rate proposed by Yang Chaojun(2011)was selected to measure the liquidity level of the NTBM and the liquidity.The proxy variable wasemployedinthe GARCH model,and theresiduals wereused as proxy variables for liquidity risk.These indicators can better characterize the liquidity and liquidity risk of the NTBM.Second,it indicatedthe development history,market positioning and problems in the development process of the NTBM.From a theoretical point of view,it analyzedthe liquidity situation of the NTBM,explaindthe origin of the NTBM.The difference and connection with the old three board market,the problems faced by the current market,and describes the existing transactions in the new three board market were also investigated.The structural characteristics of scale and the liquidity were compared between different industries.Third,of the liquidity characteristics forthe NTBM was empirically analysed.The average daily transaction data and records of the stocks forthe NTBM from September 1,2014 to January 14,2018 were selected as the research object.And a total of 302,516 observation samples in2035 New Third Board listed companies were obtained.Through the unbalanced panel model,it wasfound that the stocks in the NTBMhada high liquidity risk but a low level of the liquidity.At the same time,it wasalso found that the liquidity risk of individual stocks decreased with the Market-to-book value of company and increased with the market value of company.Through the GARCH-family model,the liquidity of the NTBMwascharacterized by clustering,long-term memory and asymmetry.The DCCGARCH model found that the liquidity risk and market risk of the NTBM interacted and strengthened each other,and the market had the possibility of triggering a liquid black hole.Fourth,empirical analysis whether the liquidity premium in the New Third Board market exists.A total of 216,868 observations in1,939 stocks were obtained during the period from March 18,2015 to January 15,2018.Through the PVAR model,we foundthat the stock market returns,liquidity level,liquidity risk and stock price fluctuations of the NTBM interacted with each other.And the liquidity level and the liquidity riskare mutually Granger causality,as well as the liquidity level and the stock price fluctuation,the stock return and the stock price fluctuation,the stock return Rate and the liquidity risk,the liquidity risk and the stock price fluctuation.But the liquidity level and the stock return rate became one-way Granger causality.Through variance decomposition,we can see the yield of individual stocks,the liquidity level and the liquidity risk weremostly explained by themselves.The liquidity level decreased with the lagging item of liquidity risk.And the liquidity risk increased with the lagging item of liquidity level,which indicating that there waspositive feedback trading behavior in the NTBM.The volatility increased with the lag term of the liquidity level.The data of 2015,2016 and 2017 wereempirically tested by the mixed panel regression model.It wasfound that there was notthe liquidity premium effect,and tthe higher the level of the flow in individual stocks,the higher the rate of return on individual stocks in 2015.Besides,there are economies of scalein 2015.And the liquidity risk wascompensated in 2015 and 2016.Fifth,the empirical analysedthe impact of government policies on the liquidity of the NTBM.Taking August 25,2014 as the demarcation point,three months before and after it were selected as the study period.From May 19,2014 to August 24,2014,the company employed a market-making transaction method.From August 25,2014 to November 30,2014,a total of 23 companies used the market-making transaction.From May 19 to November 30,2014,a total of 188 companiestreatedthe agreement transaction asthe control group.Through the empirical analysis of the PSM-DID model,it wasfound that the introduction of the market maker system has improved the liquidity of individual stocks.And other liquidity proxy variables(such as effective flow rate,bid-ask spread and turnover rate)have also been significantly improved.The daily transaction data of 1494 companies with complete transaction records from September 1,2014 to January 14,2018 wereselected as the research sample.The relationship between the liquidity level of individual stocks and the number of market-making merchants were shownasU-shaped relationshipthrough the panel model.The liquidity level of individual stocks was improved with the increase of the number of market-issuing merchants.After reaching a critical point,the liquidity level of individual stocks will decrease with the increase of market brokers.A total of 198429 observations from 421 sample companies were selected duringMarch 18,2015 to January 14,2018.The improved TARCH model was used to analyze the effects of the stratification system and reducing appropriatelyindividual investor threshold on market liquidity.The empirical results showed that the regime of these two systems reducedthe liquidity risk of the market,and the latter also reducedthe correlation between liquidity risk and market risk.September 1,2014-October 17,2018 was selected as the research period with January 15,2018 as the demarcation point.The market maker transaction on September 1,2014-January 14,2018 was employed.After that,1779 companies was converted to trading companies.The control group was a company with a market-making transaction from September 1,2014 to October 17,2016.After the PSM-DID model,it was found that the liquidity level of individual stocks was improved after adopting the regime of the auction trading system.The existing literature mainly focusedon the main board market,and there is few empirical research on the characteristics of the liquidity problem in the NTBM.This paper usedthe unbalanced panel model,GARCH model and DCC-GARCH model to study the liquidity of the NTBM and the liquidity characteristics of individual stocks.The PVAR model wasused to detect the existence of the NTBM.Based on these,the liquidity premium effect wasanalyzed.The dynamic relationship between individual income and liquidity level,liquidity risk and stock price fluctuation was alsoanalyzed.Finally,the unbalanced panel model,PSM-DID model and modified TARCH model wereused toanalysethe effects of four policy implementations since the expansion of theNTBM(the four policies are the introduction of market maker systems,tiered systems,bidding transactions and appropriateness to lower individual investor thresholds),and these policies were evaluate objectivelyd.Finally,based on the conclusions obtained,this paper proposed relevant policy recommendations: It is recommended that the government should formulates an information disclosure system,which is compatible with the characteristics of small and medium-sized enterprises.And introduce the limits of increase and decrease reasonablyBesides these,reduce the barriers appropriatelyto entry for individual investors is also need to be taken into account togradually establish a smooth capital market transfer mechanism..