Empirical Analysis Of Liquidity Premium In China's A Share Market

Liquidity is the ability that assets can be traded by lower transaction costs and reasonable price, and these prices has smaller impact on market price. With the development of China's financial market, after experiencing many financial crises characterized by disappearance of liquidity, order of financial markets has been seriously damaged, and the government regulators, investors and many experts are increasingly concerned about the liquidity of the market. China's government issued a number of measures to reform financial markets in order to improve market liquidity such as tradable share reform. Scholars have also conducted extensive research on liquidity. Based on these studies, thesis combs and summarizes these theories which affecting the liquidity in stock market, and also classifies and compares a variety of indicators of measuring liquidity. At the same time, empirical tests have been done on the question whether the liquidity exists in Shanghai and Shenzhen stock market in the paper. Around the big events occurring as the standard, the sample period is divided into several periods. Data has been done empirical tests in these several periods, and the results are compared.Thesis is divided into four parts. The first part illustrates the significance of the study, and meanwhile, does a literature review on the research of liquidity premium. The second part summarizes and compares factors relevant to liquidity and liquidity premium theory. The third part gives the empirical method, model and test results. Part IV analyzes the results of empirical tests and concluded. According to the empirical test results, the last part puts forward the proposal to the government and the investor.According to the results of empirical tests, the main conclusions of this paper are:â… . Empirical test results do not conform to the liquidity premium theory. There is not the problem of liquidity premium in Shanghai and Shenzhen stock market. But in the last sample period, liquidity premium all appears in these stock markets.â…¡. There is economies of scale in Shanghai and Shenzhen stock market. The government's tradable share reform decision is correct.â…¢. The impact of financial crisis on the stock market is very large. During this period, some explanation variables of rate of return are failure. After the worst of financial crisis, the measures were adopted by the government, and these measures promoted the stock market get into the stable and normal track.