Research On Differences Of Stock Price Fluctuation Before And After The Non-tradable Share Release And Reduction

Starting from2005, our country stock market raised the high tide of the reform ofnon-tradable share structure, the basic market pattern had a big change, by the end of2006,795companies has participate in the reform, it accounts for97.8%of the totalnumber of companies who need the reform of non-tradable share structure. As thelast link of share reform, non-tradable share release becomes special scenery in recentstock market, a large scale restricted stock also bring the huge influence in recentstock market.This paper is to find out the differences of stock market price fluctuation beforeand after the non-tradable share release, and whether the non-tradable share release isa major factor of the price fluctuation of stock market. The non-tradable share releaseand reduction will change the market supply, what kind of impact to the stock marketprice will occur, and how to deal with the impact of it are the papers purpose.This article first introduces the concept and the theoretical basis of stock marketand non-tradable share release and reduction; it includes the stock pricing theory andthe motivation why shareholders reduce the non-tradable share. Secondly, a detailedreview was carried out on the stage of development of stock market and non-tradableshare release, combined with China’s stock market development status and the newsituation of non-tradable share release and reduction, it point out the main problems inthe development process. Once again, this article empirical analysis the pricefluctuation of stock market before and after the non-tradable share release andreduction. This article uses the Shanghai Composite Index yield on behalf of the pricefluctuations of stock market between Januray1,1991to December31,2012. Thearticle studies the impact of the stock market fluctuations when non-tradable shareappears, and then use the multiple linear regression model analysis the main factors that affects the price fluctuations of stock market. Finally, this article select the datafrom Januray2007to December2012as sample data, it studies the impact ofnon-tradable share release and reduction on the market prices, and point out somesuggestions to reduce these impact at the end of this article.Through empirical analysis, this article draws a conclusion that the problem ofnon-tradable share release and reduction which comes from the non-tradable sharereform caused some influence to the price of stock market: the stock market haveobvious leverage effect after non-tradable share release appeared, the negative impactwill cause even bigger fluctuations than the same degree of positive impact, and thiseffect is difficult to disappear in the short term. Speaking from the point that the highrisk associated with high income, non-tradable share release cause the pricefluctuations of stock market decline, and it shows that the stock risk decline. Thestock risk decline means that the price compensation of stock market decreased, and itwill cause the price of stock market decline.This article using the sample data from January2007to December2012studiesthe impact of the non-tradable share release and reduction on stock market price, andit found that non-tradable share release and reduction will cause the stock marketsupply increase and the price of stock market decline. This article uses the VectorAuto-Regressive model and Impulse Response Function also found that conclusion:The number of non-tradable share release will cause the price of stock market declinefrom the second lag, but the number of non-tradable share reduction will cause theprice of stock market decline from the first lag. Generally speaking, both non-tradableshare release and non-tradable share reduction will cause the price of stock marketdecline. Although the number of non-tradable share reduction much smaller than thenumber of non-tradable share release, but in terms of the effect on the stock marketprice, the impact of non-tradable share reduction to stock market price is moresignificant.