The Empiricial Research On The Relationship Between Stock Liquidity And Price Volatility Based On Daily Trading Data In The A-share Market

As China's asset management industry is booming in recent years,more and more institutional funds flows into the A-share market through various channels.Since a lot of capital is absorbed in the stock market,the reasearch on the relationship between stock liquidity and volatility is not only important to help management agencies to improve the level of risk control,asset allocation but also match their goals to balance among profitability,safety and liquidity.First of all,this paper use jump-diffusion model to simulate the trail of price in A-share market,then estimate the parameters to specifiy the size of jump and diffusive volatility,use the Fama-MacBeth regression analysising the effect of the strcture of price volatility on stock liquidity.The study shows,diffusive volatility of stock price transfer signal of information asymmetry,and this signal causes the free liquidity traders avoid investing in these listed companies,so the stock liquidity decline.Secondly,the CSI 300 index is taken as an example to study the influence of liquidity on volatility by VAR model and GARCH method.This paper not only discuss the long and short-term shocks of liquidity to volatilty but also verify the liquidity has two effects on volatility througth GARCH method in multiple views.Liquidity directly affects the variance of returns,and directly affects the rate of return,but the uncertainty of stock yield does not affect the stock returns.Finally,this paper proposes to strengthen the information disclosure of listed companies to reduce the transaction cost of liquidity traders;reform the Price Limit,T+1 trading rules to improve the current liquidity;modify the suspension and resumption to protect the trading rights of investors.