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The Study of Excess Returns of the Liquidity Risk of each Sector in Chinese Stock Market. 李莉莉,张玉兰 LI Lili,ZHANG Yulan. I. Introduction. Foreign studies: Liquidity risk can lead to excess returns on the stock market. Chinese stock market:
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The Study of Excess Returns of the Liquidity Risk of each Sector in Chinese Stock Market 李莉莉,张玉兰 LILili,ZHANGYulan
I. Introduction Foreign studies: Liquidity risk can lead to excess returns on the stock market. Chinese stock market: Researchers cannot agree with each other on excess returns coming from liquidity risk.
II. EmpiricalAnalysis A.Liquidity indicator:
II. EmpiricalAnalysis B. Data selection: Bull phase: July 1, 2006 - October 16,2007 (the Shanghai A-share Index rose to 6395.76 points from 1784.46 points) Bear phase: October 16, 2007 - December 31, 2008 (the Shanghai A-share Index fell to 1911.79 points from 6395.76 points)
II. EmpiricalAnalysis C. Empirical process and results: Panel data model:
II. EmpiricalAnalysis C. Empirical process and results: Table 1.Redundant Fixed Effects Tests (C:BULL PHASE)
II. EmpiricalAnalysis C. Empirical process and results: Table 2.Correlated Random Effects - Hausman Test (C:BULL PHASE)
II. EmpiricalAnalysis C. Empirical process and results: Table 3.Estimation of Model Coefficient (C:BULL PHASE)
II. EmpiricalAnalysis C. Empirical process and results: • We find : • Individual fixed effects • Liquidity premium does not exist. • Value effect does not exist.
II. EmpiricalAnalysis C. Empirical process and results: Table 4.Estimation of Model Coefficient (C: large-cap, bull phase)
II. EmpiricalAnalysis C. Empirical process and results: Table 5.Estimation of Model Coefficient (C: medium-cap, bull phase)
II. EmpiricalAnalysis C. Empirical process and results: Table 6.Estimation of Model Coefficient (C: small-cap, bull phase)
II. EmpiricalAnalysis C. Empirical process and results: Manufacturing sector (Bull phase): There are no liquidity risk premium and value effects for the small-cap, medium-cap, large-cap stocks.
II. EmpiricalAnalysis C. Empirical process and results: we similarly analyze other industry sectors, the large, medium and small cap both in the bull phase and the bear phase. We find : The liquidity risk premium does not exist and there is a certain degree of negative correlati-on of the liquid risk and the excess return.
II. EmpiricalAnalysis III. Summary More effective measures to manage liquidity risk: 1. Further improve the trading mechanism ; 2. Strengthen the laws and regulations related to liquidity risk; 3. Nurture powerful institutional investors to improve risk control system; 4. Further build information disclosure system; 5. Develop the philosophy of rational investment and reduce the incidence of “herding”. A.Liquidity indicator: Among them, refers to the highest stock price for the day, the lowest stock price, the closing stock price the day before, the turnover for the day.