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: Researchers cannot agree with each other on excess returns coming from liquidity risk.

II. Empirical Analysis A. Liquidity indicator:

II. Empirical Analysis B. Data selection: Bull phase: July 1, October 16,2007 (the Shanghai A-share Index rose to points from points) Bear phase: October 16, December 31, 2008 (the Shanghai A-share Index fell to points from points)

II. Empirical Analysis C. Empirical process and results : Panel data model:

II. Empirical Analysis C. Empirical process and results : Effects TestStatisticd.f.Prob. Cross-section F Cross-section Chi-square Table 1.Redundant Fixed Effects Tests (C:BULL PHASE)

II. Empirical Analysis C. Empirical process and results : Table 2.Correlated Random Effects - Hausman Test (C:BULL PHASE) Test SummaryChi-Sq. StatisticChi-Sq. d.f.Prob. Cross-section random

II. Empirical Analysis C. Empirical process and results : Table 3.Estimation of Model Coefficient (C:BULL PHASE) VariableCoefficientStd. Errort-Statistic Prob. C

II. Empirical Analysis C. Empirical process and results : We find : 1.Individual fixed effects 2.Liquidity premium does not exist. 3.Value effect does not exist.

II. Empirical Analysis C. Empirical process and results : Table 4.Estimation of Model Coefficient (C: large-cap, bull phase) VariableCoefficientStd. Errort-StatisticProb. C

II. Empirical Analysis C. Empirical process and results : Table 5.Estimation of Model Coefficient (C: medium-cap, bull phase) VariableCoefficientStd. Errort-StatisticProb. C

II. Empirical Analysis C. Empirical process and results : Table 6.Estimation of Model Coefficient (C: small-cap, bull phase) VariableCoefficientStd. Errort-StatisticProb. C

II. Empirical Analysis 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. Empirical Analysis 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. Empirical Analysis 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. 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”.

Thank you!