What drives the liquidity premium in the Chinese stock market? |
| |
| Institution: | 1. College of International Studies, Kyung Hee University, Republic of Korea;2. College of Business and Economics, The Australian National University, Australia;3. School of Business and Law, Edith Cowan University, Australia;1. Department of Finance, National Taichung University of Science and Technology, Taiwan;2. School of Economics and Management, Nanchang University, China;1. The Australian National University, Australia;2. Macquarie University, Australia;3. Edith Cowan University, Australia;1. Business School, Hong Kong University of Science and Technology, China;2. College of Management and Economics, Tianjin University, China |
| |
| Abstract: | This paper examines the dynamics of the liquidity premium in the Chinese stock market by adopting a multivariate decomposition approach to measure the individual contributions of various driving forces of the premium (such as firm size, idiosyncratic volatility, and market liquidity betas). By employing a wide range of liquidity measures, we show that liquidity premium is generally significant in the Chinese stock market. Furthermore, this premium is increasing in recent years starting from 2011; this observation is different from the United States market, in which the premium has declined over the years. Moreover, the multivariate decomposition approach highlights several asset pricing factors as the main driving forces of the premium. Based on the Amihud liquidity measure, the decomposition approach indicates that the size factor contributes 45–65% to the liquidity premium. However, the measure based on turnover suggests that idiosyncratic volatility accounts for at least 60% of the liquidity premium. In contrast, the global market liquidity beta does not significantly contribute to the premium. However, there is some evidence that the local market liquidity beta has become more significant in its impact on the premium during the period from 2011 to 2015. Our results imply that the findings on the liquidity premium in the Chinese stock market could be sensitive to the liquidity measure used and period of analysis. |
| |
| Keywords: | Liquidity premium Size Idiosyncratic volatility Global market beta Local market liquidity beta Chinese stock markets |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
