Research On Heterogeneity: Sensitivity Of Volatility In Listed Bank Stocks To Systemic Liquidity Risk

The 2008 crisis stressed the importance of liquidity for banks.Although there have been many achievements in the research related to measuring individual bank liquidity risk,among the supervisory authority and academic world.However,systemic liquidity risk in China is still at the beginning and foreign academics paid more attention to the definition and measurement method.This paper is aimed to develop a strong understanding of how banks respond individually to systemic liquidity risk.We use a EGARCH(1,1)model as our framework,which allows one to compute bank sensitivity to daily variations in aggregate liquidity conditions.Through theoretical argumentation and empirical analysis,on one hand,our results indicate that the impact of individual liquidity risk on stock returns is more significant than that of systemic liquidity risk,which is the same as previous studies.On the other hand,we shed light on heterogeneities among banks in terms of their exposure to liquidity risk.Due to this heterogeneity in banks sensitivity to systemic liquidity risk factor,we divide banks into 3 categories.Ⅰ,the volatility of its stock returns increases with systemic liquidity risk factor.Ⅱ,the volatility of banks stock returns decreases with systemic liquidity risk factor.Ⅲ,the volatility of banks stock returns is irrelevant with systemic liquidity risk factor.Furthermore,in order to analyze relationships between bank sensitivity measures to systemic liquidity risk and balance sheet variables related to bank exposure to liquidity risk,we use a Tobit model as our work.The result shows that higher capital adequacy ratio is advantageous only forⅠbanks,notⅡbanks.And increasing deposits is advantageous only forⅡbanks,notⅠbanks.In conclusion,we provide relevant policy advices from three perspectives: bank operators,regulators and investors,based on the theory of liquidity risk management and empirical results.