Affiliations: [a]
School of Finance, Shanghai University of Finance and Economics, Shanghai, China
| [b]
School of Business, Jiangnan University, Wuxi, Jiangsu, China
Correspondence:
[*]
Corresponding author. Hailei Zhao, PhD Student of School of Finance, Shanghai University of Finance and Economics, Shanghai, China; Lecturer of School of Business, Jiangnan University, Wuxi, Jiangsu, China. E-mail: zhhl@jiangnan.edu.cn.
Abstract: In the trading activities, the liquidity level of assets and its impact on future earnings has always been a concern for investors. This paper calculates the liquidity of the stock market by constructing a frictionless asset model. At the same time, we test the application of the liquidity level premium index in the LA-CAPM model, mainly draws the following conclusions: (1) Although the individual liquidity of the stock has different individual characteristics, but showing a common trend of change. Stock individual liquidity level premium level and the stock market performance of the opposite, when the market is good, the stock individual liquidity level premium is low. (2) The liquidity premium of the market portfolio is generally inversely related to the market index, and the liquidity premium between the different market combinations is significantly different. (3) In different portfolios, the portfolio of large, value-based company stocks is superior to the portfolio of small, growing corporate stocks. The results of this study have important reference significance for the construction of liquidity index and the research of liquidity and asset pricing.
