Research On The Systematic Liquidity Of China's Listed Company Stock

The Asian Financial Crisis in 1997 and the U.S.bond market crisis in 1998 have led to the awareness that liquidity of individual stocks is strongly influenced by market factors,leading to co-movement of different stocks liquidity.Foreign scholars have carried out extensive research and called this phenomenon as systematic liquidity or commonality in liquidity.As a new order-driven market,China's stock market liquidity is provided by investors,who give preference to stocks with different characteristics,resulting in systemic factors influencing the individual liquidity differently.This paper chooses A-share in 2015-2016 as the sample and uses Amihud llliquidity and turnover rate as the liquidity measure to study the systematic liquidity according to the characteristics of listed companies.Firstly,this paper uses the Chordia et al.(2000)model to test the systematic liquidity and the empirical results show that in China's A-share market,the systematic liquidity is significantly lower than that before,but still higher than that of mature stock markets in Europe and America.It seems that with the continuous development of China's capital market reform and institutional innovation,regulatory authorities are increasingly able to better control the market risk and the systemic liquidity risk that investors are facing has declined.Foreign research shows that stock liquidity and expected return are affected by local economic conditions.The economic development level,information transparency and financing constraints in China's different provinces are very different.Therefore,when considering regional factors,the empirical results show that there does exist systematic liquidity in area level in China's stock market.This conclusion can lay a theoretical foundation for the follow-up study on the relationship between company location and stock return.More importantly,when discussing the systematic liquidity according to the characteristics of the listed companies,such as the company attributes,the value of tradable shares,stock price and P/B ratio,the results show that liquidity change of listed companies with different characteristics has different sensitivity to that of market,region and industry.When the market liquidity shock occurs,the liquidity change of small-scale non state-owned enterprises which have lower P/B,is most heavily affected.When the industry liquidity shock occurs,the liquidity change of large-scale state-owned enterprises which have lower P/B is most affected.When the regional liquidity shock occurs,there is no big difference between the liquidity changes of the listed companies which have different characteristics.Thus,when liquidity shock occurs,investors should carry out liquidity risk prevention based on different characteristics of the listed company.Finally,according to the results of portfolio's systematic liquidity based on the scale,we can discover that the portfolio liquidity change is more vulnerable to the market liquidity change,which shows that systematic liquidity risk is an important part of China's stock market system risk,and it cannot be dispersed by constructing portfolio.