An Empirical Study Of Liquidity On 50ETF

On February 23, 2005. 50ETF(Exchange Traded Fund) of Shanghai Securities is listed in Shanghai Securities Exchange, which indicates the new indexation investment tool that concentrates on investment, trading and short-term investment emerged on securities market in China. The emergency of this financial derivative brings energies to securities market, especially to the capital market in China. Then, several discussions of 'Buy index fund is equal to buy index fund' and 'Earn index is earning money' are also emerged in our securities market. Whether 50ETF can attain the above two goals or not will be talked about in this paper.In the paper, 50ETF, 50 index and synthetic indexes in Shanghai Securities Exchange are the research objects, in order to test the effective of trading. In the first place, taking synthetic indexes of Shanghai as research objects, we can conclude that capital market of China is weak form efficient by and large through run test and auto correlation test. And we break the traditional mode that only taking price fluctuation or trade volume as the appraisal index for liquidity, instead, we find a synthetic index which is containing all the price and trade information by modeling a 'Liquidity Curved-surface Function'. We conclude that the intra-day liquidity of 50ETF can be described 'L+M' type. In the next place, from price and yield series to test the efficient of trading mechanism of 50ETF: Firstly, as far as the price is concerned, we test the short-term and long-term equilibrium relation between 50ETF and 50 index, and set up the ECM; as far as the net value is concerned, the trend of net value of 50ETF is very similar to 50 index. In the secondary market, the trading price of 50ETF and 50 index have strict cointegration relation, so the goal of 'Buy index fund is equal to buy index fund' can be attained by 50ETF. Secondly, there is not enough statistic support to prove that 50ETF could get the adjusted-risk benefits over portfolio of non-management using post-adjusted-risk index, such as Jensen Index, Sharpe Index and Treynor Index; and the test results of the abilities of 50ETF managers to choose opportunities in market is not significant and should be promoted in future, so the goal of 'Earn index is earning money' may not be attained. Thirdly, as far as yield is concerned, 50ETF gets the similar yield compared to 50 index by calculating tracking difference and tracking error, the tenet of indexation investment is attained. Finally, get the whole conclusions of this paper and then some policy advices.After researching a lot of relative literatures, there are three innovative point: First, a little promotion to unit root test (DF or ADF test), and then put forward a new concept to sum up the DF (ADF) in the whole. Second, put forward a synthetic index to appraise liquidity and set up a 'Liquidity Curved-surface Function' model. Third, apply several advanced methods about market efficient to ensure the reliability of the conclusions.