Regulatory changes and market liquidity in Chinese stock markets

Lei Gao, Gerhard Kling

Research output: Contribution to journalArticle

15 Citations (Scopus)

Abstract

Our study measures the impact of institutional reforms in China on market liquidity. Using monthly data on turnover ratios, turnover–volatility ratios and stock returns for the Shanghai and Shenzhen Stock Exchange and applying an intervention model, we detect a considerable impact of regulatory changes on liquidity. Motivated by the inventory paradigm and the disposition effect, our empirical model accounts for market returns and macroeconomic shocks. The ban of futures trading reduced market liquidity; however, lower commissions enhanced trading. Market reforms were favorable for the development of financial markets—but these effects were not long lasting.
Original languageEnglish
Pages (from-to)162-175
Number of pages14
JournalEmerging markets review
Volume7
Issue number2
Early online date5 May 2006
DOIs
Publication statusPublished - Jun 2006

Fingerprint

Regulatory change
Market liquidity
Chinese stock market
Futures trading
Macroeconomic shocks
Empirical model
Shenzhen
China
Liquidity
Institutional reform
Market reform
Disposition effect
Turnover
Market returns
Stock returns
Shanghai
Paradigm
Stock exchange

Keywords

  • Shanghai
  • Shenzen
  • Disposition effect
  • Liquidity
  • Regulation

Cite this

Regulatory changes and market liquidity in Chinese stock markets. / Gao, Lei; Kling, Gerhard.

In: Emerging markets review, Vol. 7, No. 2, 06.2006, p. 162-175.

Research output: Contribution to journalArticle

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