Research On The Impact Of Stock Market Liquidity Risk To Earnings

Liquidity is one of the basic characteristics of financial assets (Amihud and Mendelson,1986), which refers to the time and cost of an investment asset into cash needed, In a short time, if the asset is converted into cash at a price close to the market price, it is said that the asset has a high liquidity. In the stock market, liquidity risk is a very important risk, and different scholars on liquidity risk also have different definitions, The most common definition of stock liquidity risk:the investors in stock market can not be timely, low cost in stock trading. Relationship between liquidity and stock returns reflect the liquidity premium theory:Because holding illiquid stock will face some liquidity risk, in order to compensate for this risk, the holder will require liquidity premium, So high liquidity stocks will get higher returns, stock market liquidity negatively correlated with income.In recent years, a large number of studies have shown that liquidity is an important factor which affecting the asset’s expected rate of return, liquidity risk has become an important equity considerations, investors are increasingly pay attention to the liquidity risk of stock investment; In general, the higher the liquidity of assets, the easier it will be in the market to close to trading in the market price, on the contrary, the worse asset liquidity, investor requirements the higher expected returns, which investors demand higher expected rate of return.The conclusions of this paper are as following:one is that before the financial crisis, during and after the financial crisis, the liquidity risk of the three sectors studied in this paper (industrial, financial and utilities) index of financial crisis yields will have some degree of influence, but the impact of the channel are different; that is, in the three periods of financial crisis, the impact of the Shanghai and Shenzhen 300 index return of industry channels distinct differences exist in various industries; Another is:in the three period of the financial crisis, although the impact of the CSI 300 industry index returns in different industries have different differences, but the impact of liquidity risk on the industry index rate of change in different industries have the same change direction, that is, in the industry, financial industry and utilities in the three periods, the impact of liquidity risk on the industry index return rate is changed according to certain rules.In order to study the impact of the stock market liquidity risk on the index return rate in the global financial crisis caused by the U.S. subprime mortgage crisis. This paper uses Acharya&Pedersen (2003) LACAPM model, the traditional CAPM model in senior high school entrance examination into the liquidity cost, using America "subprime crisis" triggered by the global financial crisis as the background, select the industry, financial industry and public utilities of the CSI 300 industry index data, using ILLIQ as a measure of liquidity risk, starting from the perspective of econometrics, the paper establishes the LCAPM model for other factors returns, liquidity risk measurement index and the impact of asset returns, by the analysis of the financial crisis under the background of Eviews quantitative software, Chinese stock market liquidity risk on stock returns in different industries, and the differences among various industries.Research on this issue can improve investor liquidity issues of concern, in making investment decisions rationally will be the factors into consideration, so as to improve the effectiveness of the investment decision of the investors. Research on this issue can be found in the development of various trading systems on the market and when market liquidity crisis, regulators how to take the right way to inject liquidity into the market to provide more perspectives on and solutions for the regulators thinking problems. Research on this issue will also help us further understand the impact of the 2008 US financial crisis on China’s financial markets and help investors understand the impact of liquidity risk in different periods, help to strengthen investors’ risk of market liquidity sensitivity, so that investors can make timely adjustments to the investment strategy and research to make the right decision on this issue can also contribute to the market regulator’s supervision of the market.