An Empirical Study On The Relationship Between Liquidity And Yield In China’s Stock Market:Comparative Analysis Of The Main Board And The Growth Enterprise Market

The relationship between liquidity and yield has been a hotspot in the researches of China’s stock market. Liquidity is one of the basic core indicators to measure the quality of one stock market. Liquidity means the capacity of stock to trade with currency with lower cost and faster speed. Compare to the research of main board market, there are few research in growth enterprise market. Domestic scholars pay more attention to the research of main board market. This paper chooses the stocks in main board market and growth enterprise market as research objectives to use empirical method to research the relationship between liquidity and yield to the stocks in main board market and growth enterprise market.The article fist describes liquidity and the multiple of liquidity and different measure indicators of liquidity. Then, we will elaborate the relationship between liquidity and yield. At last, we choose daily transaction data of 10 stocks respectively in main board market and growth enterprise market to research turnover rate and logarithmic yield. In order to guarantee the timeliness and accuracy of the research, we choose between January 4,2010 and March 31,2015 as the research area as total as 254 weeks. On the market level, select the Shanghai A-share index and the gem index from November 4, 2010 to June 12,2015 as a sample of the data. On the foundation of vector auto regression model, this paper applies impulse response function and Granger causality test to make up positive analysis, which refers to the relationship between liquidity and yield in main board market and growth enterprise market. Granger causality test shows that the change of yield can cause changes in liquidity, while change of liquidity cannot cause changes in yield whatever in main board market or in growth enterprise market. This also indirectly shows that the liquidity premium theory does not apply to China’s stock market. The result of the impulse response function shows that the transfer process of yield and liquidity is approximately the same in main board market and growth enterprise market. The increase in yield will lead to increase in liquidity over a period of time. There are differences in period of influence of the changes in yield to liquidity. The period will be long in main board market while the period will be short in growth enterprise market. At the market level, both during the bull market or bear market period, stock returns increase will cause the improvement of the level of liquidity in the follow up for a period of time, in the bull market period motherboard market liquidity received income rate changes the influence for a long time, also in bull market period motherboard market return rate also affected by changes in liquidity, but the time is short.