Research On The Impact Of Government Bailout And Stock Risk And Liquidity

In June 2014,the Chinese stock market began to set up under the stimulation of dividends from reform.The Shanghai Stock Exchange Index rose sharply from 2000 points to around 5,178 points in June 2015.It has risen more than 1.5 times.At the same time,the Shenzhen Composite Index and the Growth Enterprise Index rose more than the Shanghai Stock Exchange Index.As a result,a lot of investors were willing to invest stocks in the market and the number of stock investors reached to a new record.However,when more and more investors flocked to the market,the market bubble grew bigger and bigger.At last,the stock markets stopped growing.The Shanghai Composite Index has entered a downtrend since the second half of 2015.Then it declined to 3000 points or less in just two months with a huge loss of stocks' market value.And the phenomenon that more than a thousand stocks fall occurred frequently.The stock market's function of auto-recovery and self-adjustment seemed to fail.Then the government began to intervene in the market.Especially,the funds of the national team represented by China Securities Finance Co.,Ltd.(Certificate Company)and Central Huijin Investment Co.,Ltd.(Huijin Company)flowed into the market,bringing widespread concern in the society.According to the statistics of Wind Information,until September 30,2015,it was found that about 1,365 listed companies' top ten shareholders included at least one kind of national teams.The national team spent 1.23 trillion Yuan buying stock shares of 49%,which including the stocks in the main board of Shanghai Stock Exchange and Shen Zhen stock market,small and medium board,GEM board.As a representative of the government,the national teams with absolute authority started to rescue the markets,undoubtedly sending a signal of stability to the investors.This article intends to study the impact of the buy-in of the national team funds on the stocks during the period of stock market crisis in 2015.Firstly,we investigated the effectiveness of the national team's fund buy-in rescue strategy from the three dimensions of yield,risk,and liquidity,and analyzed the relationship between the behaviors of the national team's funds buy-in rescue strategy and the rate on stock returns,risk,and liquidity by constructing a double difference regression model.In terms of risk measurement,three indicators including total risk,systemic risk,and trait risk were used in this paper to thoroughly demonstrate the real impact of the buy-in of the national team funds on different risks.In terms of liquidity,by referring to the Amihud method,this paper constructed the illiquidity index as a liquidity proxy variable.At the same time,this paper also used the turnover rate to measure liquidity,and observed that what the reflection was when the funds of national teams started buying relevant stocks.Then,the article further studied the national team's buy-in rescue stock selection preference behavior.On the one hand,this paper carried out a descriptive statistical analysis on the stocks purchased by the national teams from the view of industry and intended to reveal the industry preferences of the national team's stock choice.On the other hand,this paper analyzed the factors that influence the national team's shareholding ratio by using regression model such as company size,book value to market ratio,return on net assets,and asset-liability ratio.Finally,this article also studied the effect of the proportion of national team holdings on stock returns,risk,and liquidity after the bailout.This paper constructed regression model and found out the following conclusions:(1)During the stock market crisis,the national team's buy-in bailout could effectively increase the stock returns,bring excess returns,and reduce the total risk of stocks and systemic risks.However,it would increase the risk of individual stocks and reduce the liquidity of individual stocks.(2)The stocks that national teams bought involved 15 industries.And they tended to buy shares in manufacturing.As for detailed stocks,the national team's preferred to buy stocks with low total risk and high liquidity.At the same time,they would consider the stocks with high system risk,large market value,and high book-to-market value ratio.However,there is no performance from the view of individual stock returns.(3)The higher the ratio of the national teams held detailed stocks in the market,the higher the yield and excess returns,the smaller the total risk and the smaller the systematic risk the stocks would have,but the trait risks would be higher.In terms of liquidity,the higher the proportion of the national team's held detailed stocks,the lower the liquidity of individual the stocks had.Based on the above research,this paper finally proposed some proposals for dealing with such problems from the aspects of improving the institutional system,strengthening supervision,etc.It would provide a reference for the government to effectively respond to the stock market crisis in the future.