An Empirical Study On The Transaction Costs Of The Market Of Shanghai

The stock market of China has been growing up for 25 years, the market mechanisms and efficiency have been improved gradually. How, the stock market of China still has some characteristics inevitably, which affects its efficiency and its development. In view of this, it is necessary to study the microstructure characteristics of the market of China, understand the underlying causes of the impact of stock market volatility.This paper studied the microscopic structure of Shanghai Securities Market from the view of transaction cost. The study of transaction cost began from the bid-ask spread. It is the most direct and most common indicator to measure the transaction costs. Since the stock market of China implements command-driven system, this paper chose the relative effective spreads to measure the transaction cost. RES= |P - I1/I, Prepresents the price of the stock, and I represents the mean of the best bid price and the best offer price. This paper selected 36 samples of SSE 50 Index constituent stocks to study. Research from 24 November 2014 to 31 December 2015, It contains a complete rise and fall in the securities market of China. This paper divided the study period into three stages according to the major policies event which affected the market. With high frequency trading data, this paper studied intraday and intraweek patterns of transaction cost and the influencing factors of transaction cost.The empirical results show:(1)Transaction cost in SSE show different levels in different periods. In bull market, transaction cost is relatively low and less volatile, market liquidity is good; in bear market, transaction cost is relatively high and more volatile, market liquidity is bad. (2) Transaction cost in SSE show different features of changing in different periods. In bull market, transaction cost in SSE exhibits L-shaped both intraday and intraweek pattern. In bear market, transaction cost in SSE exhibits U-shaped both intraday and intraweek pattern. (3) Transaction cost in SSE has different factors in different periods. In bull market, the stock price has negative effect on transaction cost, and both risk and quote depth have positive effect on transaction cost. But in bear market, these factors have no effect on transaction cost.This study may help investors to accurately estimate transaction cost to make trading decisions. While helping market organizers and regulators to improve the market environment and to promote the market innovation.