Stock Market Liquidity Measure

After the development of more than ten years,the securities market in China plays an increasingly role in the construction of market economy . And numerous scholars have been attracted to research it。Liquidity is one of the significant characteristics of stock market. Supplying enough liquidity to Investor in the market and letting the exchanges carry out swiftly and effectively at the lowest deal costs ,is the important existent base of the stock market。As to research on the liquidity of securities markets,western scholars started since the 60's in 20th centuries .And they widely adopted empirical research methods in their studies. Because the empirical research is close to the quantitative characteristics and quantitative relation of liquidity, correct measuring of liquidity becomes the base of liquidity research.Although the research of liquidity in China appeared relatively late, they also adopted empirical and theoretic research methods, and united them together. But as one of the jumped-up markets,our securities market is different from the developed capital markets of the country such as Britain and USA. So there may be a great deviation, if directly utilize the research methods of external when research the liquidity of securities market in China.This thesis just tries to make a summary of the measure of liquidity, and draws a conclusion about how to choose the fitting ones to measure the liquidity of securities market in China. Except the theoretic analysis, it also does empirical research.In the reasoning procedure, this paper discusses selection of liquidity measure from the common securities market to a special securities market. First of all, the author recognizes the meaning of liquidity. Then it divides the measures into three types and reviews them separately. Thirdly, itgives a common frame of how to choose the measure of liquidity in securities markets. Finally, the author draws a conclusion on which one is the most proper liquidity measure of securities market in China, and does empirical analysis.This thesis is divided into five chapters : Chapter One is recognition of liquidity in securities market. The meaning of liquidity consists of three aspects : length of the exchange time,size of the exchange cost and the effect which exchange has to price. In securities market with high liquidity, participators can carry out exchanges at low costs immediately, and the exchanges won't arouse great price fluctuate. Researching the liquidity of securities markets and the liquidity measure has a significant theoretical sense and practical sense .Studying the liquidity in securities markets ,is not only beneficial to it own development and improvement ,but also to strengthening the corporation's exterior management and improving the managing level of macro-economy. And studies about the liquidity measure are the base of liquidity research.Chapter Two is summarization and review of liquidity measure applied in securities markets. In this part, we classify the liquidity measures in accordance to the meaning of market liquidity and the difference among each measure. The first type includes the measures based on exchange time. This type of measures can be understood easily,but most of the actual data ,which the measures demand, is difficult to gain. The second type of measures is based on the exchange costs, and is subjected to the market price formation mode and the assumption of market efficiency. The third type is established in the price fluctuation caused by exchanges, and it also has own advantages and disadvantages. The measures, except the three above, are defined as the fourth type.Chapter Three is the frame of the liquidity measures selection. Thischapter discusses how to choose liquidity measures to research a special securities market. Since the fact that there is no measure that can reflect every aspect of liquidity, when we choose liquidity measures, we should consider the condition of the securities market at first. Then select the proper liq...