| Commonality in Liquidity refers to the existence of certain common factors in the market that affect the liquidity level of all stocks,so that there is a significant correlation between the liquidity of different stocks and the convergence of liquidity changes,that is,the liquidity propensity of individual stocks has improved or worsened at the same time.The existence of liquidity commonality indicates that the liquidity of individual stocks is determined at least in part by the liquidity of the entire market.Therefore,this non-dispersible risk is regarded as an important factor in stock pricing,and this non-dispersible risk factor causes the whole changes in liquidity make liquidity risk a type of systemic risk.On the other hand,due to the non-dispersible characteristics,commonality in liquidity is also considered to be a key factor leading to the fragility of market liquidity that often leads to stock price fragility and stock market decline.Specifically,in the stock market,liquidity is very fragile.When there is a crisis in the market,due to the existence of liquidity commonality,liquidity will rapidly decrease or even "evaporate" in a short period of time,which will further trigger the market.Rapid decline.Different from the developed capital market represented by the United States,China’s stock market is more serious with the same rise and fall,which means that the liquidity commonality of the Chinese market is more serious than foreign countries.As a major emerging market,China’s stock market plunged without any signs in December 1996,July 2001,May 2007,August 2009,April 2010,June 2013,and June 2015.In particular,from 2015 to 2016,China’s stock market fluctuated drastically.After experiencing a serious"security disaster" in the age limit,the Shanghai Composite Index fell from 5179.19 points on June 15,2015 to 3507.19 points on July 8.Correspondingly,there were 2,139 listed companies whose stocks fell more than 30%,1390 listed companies whose stocks fell more than 50%,and more than 1,400 listed companies chose to suspend trading.The liquidity of the Shanghai and Shenzhen stock markets was almost exhausted..As of January 27,2016,the Shanghai Composite Index fell to 2638.30.The stock market crash mainly represented two aspects of transactional liquidity crisis and systemic liquidity crisis.This made us deeply understand the necessity of investigating the problem of liquidity commonality in China’s stock market.Based on the above analysis,in order to ensure that Chinese investors can have a deeper understanding of the impact of liquidity problems in the process of investment decision-making and the development of regulatory and governance measures,the existence characteristics,causes and causes of the commonality inliquidity commonality of China’s stock market research on issues such as risk premium has important practical significance.Therefore,this paper takes the existence characteristics,causes and risk premium of China’s stock market liquidity commonality as the main content of the research.Based on this,the main work and conclusions of this paper can be divided into the following four parts:First,the analysis of the existence characteristics of the stock market’s liquidity commonality.The existence test of the liquidity commonality of China’s Shanghai and Shenzhen stock markets shows that there is a significant change in liquidity commonality in China’s stock market.Moreover,with the watershed before and after the end of the share-trading reform in 2007,the degree of liquidity commonality in China’s stock market showed significant differences.After 2007,the degree of liquidity commonality declined significantly.In addition,this chapter examines the time-varying characteristics,scale effects and liquidity effects of China’s stock market liquidity commonality.It is found that the commonality in liquidity shows obvious time-varying characteristics,and the change of market environment will seriously affect the cohesive strength of liquidity commonality.Especially during the period of sharp decline in the market or the financial crisis,the degree of liquidity commonality change in China’s stock market has increased significantly and even peaked.In the upward market trend,the liquidity commonality change of China’s stock market is not sensitive to this change.Contrary to the conclusions of developed markets abroad,the degree of stock liquidity commonality in China does not show an increasing effect with the increase of stock market size and liquidity level,but shows a decreasing effect with increasing scale and liquidity.Further,this chapter also explores whether the increase in liquidity commonality in the stock market decline will cause liquidity to dry up.It is found that the increase in liquidity commonality due to the sharp decline in the market will lead to a further decline in the liquidity level of the stock,and as the market environment continues to deteriorate,the degree of negative impact of liquidity commonality on the level of stock liquidity also becomes Bigger.This shows that when the stock market falls,strong liquidity commonality may even lead to the depletion of market liquidity.Second,the reasons for the commonality in liquidity caused by fund holdings under the demand side perspective and channel analysis.As an important participant in the capital market,institutional investors play an important role in driving the formation of liquidity commonality.Therefore,based on the demand side perspective,this paper probes into the reasons why China’s funds are related to each other’s trading needs and eventually leads to liquidity commonality.To this end,this paper constructs a high fund holding portfolio and calculates the liquidity commonality of the portfolio,empirically testing the relationship between the high fund holding portfolio liquidity beta and the fund holding ratio,and found that between 2010 and 2017,with the increase in the proportion of stocks held by the fund and the commonality in liquidity and high fund holdings will become stronger.This finding provides evidence to support the fund’s related transactions driving liquidity covariation.The explanation of the demand side factor suggests that the related transaction is the cause of the commonality of liquidity.For the fund,related transactions,on the one hand,are reflected in the common commonality in active trading behavior,such as herd behavior,on the one hand,the common commonality in passive trading behavior,such as the pressure of investors’ capital inflows and outflows.To this end,this paper further examines the reasons why China’s funds are related to each other’s trading activities and lead to commonality in liquidity from two aspects:herd behavior and fund flow commonality.It is found that the fund’s herd behavior has a significant impact on the commonality in liquidity,especially when the fund has a seller’s herd behavior.The liquidity shock caused by the change of capital flow is indeed an important driving factor that causes the fund’s shareholding ratio to positively affect the liquidity commonality.The positive impact of the fund’s intrinsic capital inflow is greater.From the perspective of fund holdings,the impact of demand factors on the commonality in liquidity is analyzed.It is assumed that fund holdings directly reflect the trading of funds,but this is only from the perspective of individual funds.In fact,even if the fund does not hold a common stock,it will still generate related transactions.This requires consideration of the shareholding structure between the fund and the fund.The commonality in the herd behavior and capital flow of the previous fund cannot be analyzed.The shareholding relationship between the two funds.To this end,this paper draws on the research of Koch et al.(2016),for each pair of stocks in each quarter,calculate the corresponding shareholding ratio of the fund holding any one of the stocks,and discuss"Common ownership".And the role of "Correlated liquidity shocks" in the liquidity commonality of fund-related transaction demand.The channel analysis of the commonality in liquidity found that the degree of liquidity correlation between any two stocks did not increase with the increase of the corresponding shareholding ratio of the funds holding the two stocks,rather than overlapping.An increase in the corresponding shareholding ratio of a fund holding two stocks will have a significant positive impact on the above correlation.This shows that China’s funds mainly through the "Correlated liquidity shocks" channel,rather than the "Common ownership" channel,resulting in the fund’s trading demand related and triggering the commonality in liquidity.Third,the liquidity commonality has become an empirical analysis of the "supply side"and "demand side" explanations.When discussing whether the supply-side factors of financial intermediaries facing financing constraints will lead to the commonality of China’s liquidity,this paper refers to the foreign literature,and constructs the excess returns of brokerages,the interbank lending rate,the repurchase of government bonds,and the leverage of the financial sector as the proxy indicator of its financing constraints,the empirical test finds that the impact of the remaining three variables on the liquid commonality is affected by the significant negative impact of the excess returns of the securities firm on the liquidity supply side.This explanation is not supported.Therefore,in the conclusion of the research obtained by Karolyi et al.(2012),this paper argues that the change of liquidity supply when China’s financial intermediaries face financing constraints is difficult to be used as a source of liquidity commonality.With regard to the explanation of the liquidity demand side,this paper finds that:(1)the change of turnover rate and the level of institutional shareholding are significantly positively correlated with the level of liquidity commonality in China,indicating that the relevant trading behavior of Chinese investors does cause liquidity commonality;(2)Contrary to the findings of Karolyi et al.(2012),there is a significant negative correlation between investor sentiment and liquidity commonality in China’s stock market,indicating that investor sentiment declines or pessimistic investor sentiment increases the commoanlity in liquidity;(3)Whether it is between investors or between the inside and outside of the enterprise,the increase in the degree of information asymmetry will lead to a more intense commonality in liquidity.Therefore,information asymmetry is the cause of the liquidity commonality in China’s stock market.An important reason.Although a large number of documents emphasize that financial intermediation financing restrictions are important liquid supply side factors that trigger stock market liquidity commonality(Brunnermeier and Pedersen,2009;Hamed et al.,2010),the conclusions of this study indicate that the demand side factors:investors’ related transactions,investor sentiment and information asymmetry are more able to explain the emergence and dynamiccommonality of China’s liquidity commonality.Fourth,an empirical analysis of the risk premium of China’s stock market liquidity commoanlity.The theoretical models of Acharya and Pedersen(2005)point out that the risk of liquidity commonality is one of the important components of liquidity risk,but the empirical conclusions on the risk of liquidity commonality risk are not uniform.Anderson et al.(2013)pointed out that the risk of liquidity commonality is highly correlated with the level of stock liquidity,so the low liquidity commonality that was previously found in the literature may be misleading.Based on this,this chapter refers to the dual-sequence combination construction method proposed by Anderson et al.(2013)to construct a liquidity co-transformed zero portfolio,and discusses whether there is a liquidity commonality risk premium in China’s stock market.The results show that the investment portfolio with high liquidity risk can obtain a statistically significant liquidity risk risk premium.During the sample period(January 1997 to December 2017),investors will receive an annualized 3.82%.The liquidity commonality risk compensation.The regression results of the factor model also indicate that,consistent with the conclusions of Moshirian et al.(2017),as a non-dispersible risk factor,the risk of liquidity commonality is priced.Further,this paper also examines whether the liquidity risk risk premium after the expansion of the portfolio holding period is sustainable.It is found that with the increase of the portfolio holding period,the liquidity risk risk premium shows a downward trend,indicating that China’s stock market The mobile commonality risk premium is unsustainable in the long run and is a short-term risk premium.Compared with the existing domestic research literature,the innovation of this paper is mainly reflected in the following aspects:First,aiming at the existence characteristics of the liquidity change of China’s stock market,it focuses on the time-varying characteristics,scale effect characteristics and liquidity effects of liquidity covariation with market environment commonality to help investors and market regulators.A better understanding of the dynamic commonality in liquidity,which helps investors make more accurate investment decisions,and regulators maintain market stability more efficiently.Second,as an important participant in the capital market,institutional investors play an important role in driving the formation of liquidity covariation.Based on the demand side perspective,this paper first examines the reasons why China’s funds are related to each other’s transaction needs and ultimately leads to liquidity commonality,and further analyzes the corresponding channel mechanism of the fund’s related transactions that triggers liquidity covariation.Third,based on the theoretical explanation of the supply side and the demand side,which are caused by the commonity of liquidity,construct supply side factors such as financing constraint agent indicators faced by financial intermediaries,and demand side factors such as related transactions,investor sentiment,and insiders and outsiders.The proxy indicators of the degree of information asymmetry between investors,comprehensively and deeply examine the driving reasons for the commonality of liquidity in China.Fourth,as one of the non-dispersible risk factors,the paper studies the risk premium of China’s liquidity change for the first time.For the first time,through the double-sorting method,a liquidity-to-zero portfolio that controls the liquidity level is constructed.It is found that there is a significant liquidity risk risk premium in China’s stock market.During the sample period,investors will get about 3.82%annual liquidity commonality risk compensation. |
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