The Case Study Of China's A-share Stock Market Crash In 2015

After seven years' bear market, China's A-share market ushered an unprecedented bull market, the Shanghai Composite Index rise from 2458 to 5178 within just one year. The total turnover volume hit 2 trillion a day, which is the highest in the history of mankind. However, as the SEC started to check stock OTC financing strictly, the market quickly turned into bear, the market in June and July experienced a flurry of decline, several thousands of shares slumped by limits, A-share's liquidity evaporated,25 trillion market value evaporated, eventually in the government's trillion bailout measures market was stabilized.This paper start from the perspective of the liquidity crisis, and take the liquidity spiral model as a basis for analysis the causes of the current round of A-shares stock market crash. From a liquidity crisis, far to 13 years the shortage of money in June, near in June 15 of the stock market crash, all can show the importance of liquidity to A-share market. This article starts with the analysis of OTC stock financing and inside financing and other highly leveraged speculators capital. It is pointed out that the when liquidity in the market become tight, it will lead to higher margin ratio or loss of speculators thus limiting the speculators' ability of providing liquidity to the market, leading to the exhaustion of liquidity, causing a decline in liquidity spiral. This paper argues that the SEC started to check stock OTC financing strictly be the starting point of the liquidity crisis, liquidity spiral model go with capital losses on speculators-selling stock-price avalanche-financing difficult-speculators capital losses and capital losses on speculators-selling stock-price avalanche-positions loss-speculators capital loss these two path, which eventually led to the crash.In order to strengthen the persuasive power of liquidity spiral model, this paper counted the he number of times of crash. And also doing the "fuse" back testing on the Shanghai and Shenzhen 300 index, which found that the proportion of China's stock market fuse was significantly higher than that of the U.S. stock market, the same time, this paper calculated the improved liquidity indicators ILLIQ-Z, found during the crash of stock market liquidity is less than before the crash of the 1/10, from the data confirms the previous hypotheses. Finally, this paper creatively put forward combination of spiral model and Amihud liquidity premium to explain the stock market crash, liquidity spiral is the form of the stock market crash, and liquidity premium is the essential reason for prices collapsed.