The Relationship Between Liquidity And Stock Yield:An Empirical Analysis Based On The Shanghai A-share Market

The relationship between liquidity and yield has been a hotspot in the at home and abroad scholars researches. When discuss liquidity and yield relationship, experts and scholars first of all pay attention to the liquidity effect on stock yield. But in recent years, the stock yield effect on liquidity also attracted more and more attention. Based on this, this paper will test liquidity and yield relationship in China’s A-share market.The article fist describes liquidity and its metric, contrasts liquidity indicators. Then, we will elaborate the relationship between liquidity and yield. Taking into account the unique factors in China’s securities market, we will utilize Grange causal test, pulse response, and regression of time sequence to analyze correlation between liquidity and yield based on the Shanghai A-share market. The results find that:In the16sample stocks of the financial industry,12stocks test results support that the stock yield Granger causes liquidity, and only one stock supports that liquidity Granger causes yield. The impulse response result also indicates that in China’s A-share market, correlation between liquidity and yield mainly performs that stock return drives liquidity changes, which is different from the results of previous studies. Additionally, the time-series regression shows the stock yield has an asymmetric effect on liquidity, which means with respect to the upswing market, the stock yield effect on liquidity is even more prominent in the downswing market.