Chinese Stock Market Liquidity And Earnings Relationship Study

There is a considerable amount of attention to understand the liquidity problem after James Tobin (1958) proposed the concept liquidity of financial asset, the researchers studied the liquidity problem in the fields of definition of liquidity, measure of liquidity, the factor influence the liquidity and the effect on stocks returns of liquidity. Studies on the relationship between liquidity and returns in stock market, Amihud and Mendelson (1986) presented that liquidity cost is one of important factors investors need to be considered when they make investment decision, and analyzed the effect of liquidity which is measured by bid-ask spread on asset pricing by building up a model, on the condition that the difference of investment timing exists. Then, more and more scholars made demonstration analysis on the effect of liquidity on the price or return of stocks in western mature stock markets and Emerging markets, and the results of demonstration analysis showed that liquidity is one of factors influenced stock pricing in western mature stock markets and the same conclusion didn't be found in Emerging markets. In China, There are also some scholars studied the relationship between liquidity and stock pricing by different measure indexes, but the conclusions are conflicting. This paper makes demonstration analysis on the effect of liquidity on stock pricing in Chinese stock market, by picking up illiquidity and turnover as the measure methods of liquidity.The paper has five parts:The first part is introduction. It briefly introduces the sense of stock liquidity research in theory and in practice, and introduces the state of research on stock liquidity nowadays.The second part introduces the definition of liquidity and the four dimensions of liquidity. There is not a famous standard definition of liquidity, so this paper summarizes the existing definitions of liquidity and introduces the fore dimensions...