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Study On Liquidity Of China Stock Market

Posted on:2005-01-25Degree:MasterType:Thesis
Country:ChinaCandidate:J LiuFull Text:PDF
GTID:2156360122994936Subject:Political economy
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Liquidity is the vitality of the securities market, which is significant no matter for improving the operating quality of securities market, optimizing resource distribution and promoting the economic growth. Since the eighties of 20th century, several financial crises taking liquidity disappearing as characteristic made liquidity receive the unprecedented attention. China stock market requires market liquidity to be advanced in order to bring about its steady improvement. Thus, this paper uses the econometrics methods analyses the weekly data of Shanghai SE 30 index and SESE Component sub index respectively from July of 1998 to July of 2002 in order to probe the liquidity level and characteristic of the stock market of our country.This paper, which can be divided into two chapters, studies the market liquidity empirically and theoretically.Starting with define to liquidity and its attribute, in the first chapter, I study liquidity definition, importance, measure methods and influencing factors, then summarize the studies of China market liquidity.Disputes on liquidity definition derive from its multiple attribute. Now the definition commonly used gives consideration to the respects, such as speed (trade time), the price (trade costs) and impact to the price (volatility), etc. The disputes introduce many kinds of measure methods of market liquidity, among them one way based on impact to the price of the trading volume has considered the influence of prices and trading volume synthetically and is more extensively used.A large number of research documents indicate that the improvement of the liquidity of stock market can really improve the operating quality of the stock market, through lightening information asymmetry degree, dispersing risk, improving corporate governance to promote the economic growth, at the same time, mobilizing deposits to increase accumulation of capital.So far, the research of the liquidity of China stock market focuses on the study on intraday liquidity model. Some consider that bid-ask spreads in trading day display L-shape, but intraday depth look like M-shape or inverted S-shape. In addition, somemake use of liquidity measure method on the basis of trading volume impact of price.Theoretically, influencing factors of market liquidity can be classified into three categories: market participants, market microstructure and product design.According to the liquidity measure index this paper defined, second chapter examines liquidity level and characteristic of the nation's two stock markets in Shanghai and Shenzhen empirically.This paper, based on Hui-Heubel Liquidity Ratio, proposes a weekly liquidity ratio used in my study. The main conclusion includes:1.In my study period, the weekly liquidity ratio change of Shanghai A share market and Shenzhen A share market show that Shanghai A share market has unceasing prosperity, for since 1998,liquidity has tend to improve and volatility also has tend to be smooth. But in the second half of 2001,it took an unexpectedly turn for the worse.2.By K-W nonparametric test, I examine whether weekly liquidity ratio's mean for the adjacent two years in the same market has a significant difference. Then I draw a conclusion that showed there're significant differences from 1999 to 2000 and from 2000 to 2001.3.Though 1-sample K-S nonparametric test, I find that weekly liquidity ratio isn't consistent with common distribute.4.By lateral comparison, I find weekly liquidity of Shanghai A share market should better than that of Shenzhen A share market. Moreover, volatility is lower. By K-W nonparametric test of weekly liquidity ratio in two markets in the same year, I also find that in A share market of Shanghai and Shenzhen, there're remarkable differences in 2000 and 2001.5.After descriptive statistics and K-W nonparametric test, I observe that as follows:Firstly, the liquidity level of local stock and others in Shanghai and Shenzhen A share market have different characteristics. And liquidity of local stock should be higher than that of...
Keywords/Search Tags:market liquidity, liquidity ratio, market microstructure
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