The Impact Of Macro-liquidity On Equity Price In Secondary Market: An Empirical Research Based On Chinese Securities Market

Asset pricing is one of the core tasks of finance in recent years, scholars study on relationship between liquidity and equity prices from both theoretical and empirical perspective, they injected new vitality into the most traditional areas of asset pricing. This paper study the impact of macro-liquidity on equity pricing, and use China's stock market data to study the liquidity impact of macro-liquidity on equity pricing from an empirical point of view. This paper includes the following aspects:First, this paper reviews domestic and foreign literature research on the relation between liquidity and asset pricing. Based on the definition of liquidity, we divide liquidity into three categories, which are macro-liquidity, systematic liquidity and micro-liquidity. And we comb the literature of liquidity and asset pricing according to the division. In the process of combing the literature, we find that most research focused on the impact of micro-mobility on equity pricing instead of the impact of macro-liquidity on equity pricing. Moreover, most studies on the relation between macro-liquidity and pricing are related to the overall price of stock market. So, this paper study the impact of macro-liquidity on equity pricing from both theoretical and empirical perspective.Second, based on the review of the literature, this paper discusses the factors affecting macro-liquidity and the mechanism of macro-liquidity's affection on equity prices. In theory, macro-liquidity has positive impact on equity price. But in fact, changes macro-liquidity does not have positive impact on asset price at all times, their relation is also affected by the supply and demand conditions of general commodity, expected return of equity assets, as well as change of haven demand.Then, this paper selects data of all a-share listed companies from 2002 to 2010, and demonstrated the following three assumptions through proposed model: (1) macro-liquidity can indeed enhance the price of equity prices, and thus increase the return; (2) Macro-liquidity will affect the market pricing of firms'profitability. Specifically, when macro-liquidity is sufficient, market would not be so sensitive to profitability, it tends to ignore the profitability of stocks; however, when the macro-liquidity is not sufficient, the market would be more sensitive to profitability, it places greater emphasis on the information of earnings. (3) Further, this paper divides sample companies into two groups of companies by industry, one group is cyclical companies, and the other is non-cyclical companies. Empirical research finds that the above phenomenon is more obvious in the cycle group.