An Empirical Study On The Correlation Between Liquidity And Return Rate Of China's Stock Market

The correlation between stock market liquidity and rate of return has always been a hot issue in academic research.Liquidity is one of the important indexes to measure the efficiency of stock market.The global financial crisis in 2008 had a great impact on China's stock market,in addition to the “Wulongzhi” securities in 2013,the stock market crash in June 2015,the circuit breaker mechanism in 2016 and the new rules for reducing holdings and other events.In this context,a large number of studies on stock market returns and liquidity have emerged.An in-depth analysis of the relationship between the two can not only deepen the understanding of China's stock market,but also help investors improve investment efficiency and avoid investment risks.On the basis of reference to advance research,this paper combined with the actual situation of our country stock market,using DCC-GARCH model to the Shenzhen composite index,the Shanghai and Shenzhen a-share index and Shanghai composite index on January 4,2007 to December 31,2018 illiquid(the absolute value of yield and equity turnover ratio)and rate of return dynamic correlation coefficient,and then use the turnover rate instead illiquid index of robustness test of the model.The empirical results show that :(1)Illiquidity and yield have a significant negative correlation.Both the Shenzhen composite index,Shanghai-Shenzhen a-share index and Shanghai composite index reach the same conclusion,and the negative correlation among the three dynamic correlation coefficients accounts for more than 98%.(2)There is a significant positive correlation between turnover rate and yield rate in the selected sample interval.(3)According to the first two results,we can find that there is no liquidity premium in the Shenzhen stock market and the Shanghai stock market.(4)The correlation between stock market liquidity and yield is directly related to the indexes selected in this study.According to the research results,this paper finally puts forward the corresponding countermeasures and Suggestions.