Empirical Research On The Impact Of The GEM Stock Liquidity On The Rate Of Return

Liquidity is one of the most important properties of the capital market, which is the vitality of the stock market. It refers to the ability of the assets to be sold at a reasonable price within a certain period of time and will not lead to a sharp fluctuation in prices. Amihud and Mendelson(1988) pointed out: "Liquidity is everything of the market." Stable liquidity levels of financial market can reduce transaction costs, absorb external shocks and reduce price volatility, thereby enhancing investors' confidence and promoting the stability of financial markets. Since Amihud and Mendelson used bid-ask spread as a measurement standard of liquidity and found the phenomenon of liquidity premium in 1986, domestic and foreign scholars carried out extensive research on the liquidity premium and asset pricing issues, and made a lot of valuable research results. Domestic scholars mainly focus on the Main Board in terms of research on the stock liquidity and liquidity premiums of mainly. Research on GEM liquidity premium is less.The GEM market of China provides financial funding channels for SMEs, especially for high-tech enterprises. Although the the GEM market was established a short time ago, GEM has developed rapidly in various aspects and GEM is an important and indispensable part of China's capital market system. However, GEM listed companies are generally in the formative years and in small size that the share price can be easily manipulated. Research on the GEM market liquidity can provide theoretical support for GEM solving liquidity problems and formulating policies, thereby making GEM function better in investment and financing.This paper based on the study of domestic and foreign scholars, established in the GEM, selecting stocks listed on the GEM before August 2013 as the study sample and selecting August, 2013 to August, 2015 as research interval, uses turnover and a new liquidity indicator called L as liquidity measure index. The paper uses Panel Data Model to analyze the impact of the GEM market liquidity on the stock expected return and investigate whether exists scale effect, BM effect and other market anomalies that not tested by traditional CAPM model in the GEM market. Then, this paper which divided study interval into rising form and falling form to conduct regression analysis, examines whether the liquidity premium vary in different market. The results of this paper show that liquidity premium phenomenon does not significantly exist on GEM market regardless in the entire period. After dividing sample interval into rise and fall period, the regression results show liquidity premium also does not exist in the rise and fall period. In addition, after adding the control variables, the regression results show that the GEM exists small firm effect in entire period due to its size and yield a negative correlation, but does not exists small firm effect in rise and fall period. BM effect of the GEM can't be verified in entire and rise period. But there exists BM effect obviously in fall period. After the addition of these control variables, goodness of fit of the regression models is better, indicating that these variables are important factors that affect stock returns.