The Spillover Effects Of Financial Innovation On The Capital Market

The theory of finance innovation is based on the development of financial economics. When talking about financial theories, we have to mention the development of finance. Finance stemmed from "asset portfolios ", Macwitz, 2050s. He discussed how to find effective asset portfolios' boundary, which extremely boosted the development of invest theory. His students William Sharp, advanced the epoch-making model, "capital and asset pricing model, CAPM" which raised specific measures for the risk and profit of invariants while making the innovation of derivative financial products possible. This model disclosed that each investor in themarket would meet with two typical risks--system risk and non-system risk. It is alandmark on the financial history. And it affords a classical equation to figure out the risk on the market, at the same time, it also shows that financial innovation has the probability. With other financial theories coming forth following tens of years, a so favorable environment of financial innovation formed. And it's a most important theoretic background foe the financial innovation.In resent years, the research of financial innovation has been more attention in our country; some specialists through our country's economic practice discussed the influence of financial innovation on macro-economic, especially, about the money policy efficiency. But from the connection of financial innovation and capital market, the research may have not enough attention, how financial innovation would affect the efficiency of capital market? And how through? How to adjust the financial innovation so as to improve the development of the capital market and keep the financial risk away? All of these need research more deeply.This article mainly discussed the financial innovation after formed affect the capital market through kinds of channels. Firstly, this is a qualitative analysis, especially on macroeconomics. The article analyses the relationship between financial innovation and the efficiency of capital market and capital risk and capital supervision. Then, through the result, we talked our country's practice. Finally, the article give some advises on how to make full use of financial innovation to promote the development the capital market.From the structure, the article would be composed of five parties. The first chapter mainly discusses the connotation of financial innovation, and reviews the general meanings of financial innovation on capital market.The second chapter mainly discusses the influence on the efficiency of capital market. The efficiency of capital market can be weighed from the angle of capital functions. The capital market functions mainly include transform financial assets liquidity risk elusion price and recourse collocation and so on. Financial innovation would set these functions upon capital market, and then disclose the different channels through financial innovation diffusion. All of these can be devised into two aspects: micro and macro. They would induce different result on capital market.The third chapter focuses on the influence of capital market risk and supervision; on the one hand, financial innovation can transfer or remove or share part risk of market, on the other hand, the financial innovation tools itself would produce new risk. The article analyses the motivation of financial innovation from three aspects to disclose the cause of new risk, and gives several principles. At last, the article points out the course of influence between financial innovation and capital market supervision.The fourth chapter reviews our country's financial innovation, then gives briefly analysis on our capital market.The conclusion brings forward the important meanings of development of capital market through choosing different models on financial innovation. And the adjustment of financial innovation also has connect with the development and perfect of capital market.