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The Effect of Suspensions on Liquidity of the Chinese Stock Market

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The Effect of Suspensions on Liquidity of the Chinese Stock Market

Dong, Yingting (2019) The Effect of Suspensions on Liquidity of the Chinese Stock Market. Masters thesis, Concordia University.

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Abstract

In this paper, I study the effect of suspensions on liquidity of stocks in the same industry or province in the Shanghai Stock Exchange A-share market from 1997 to 2017. I find that each additional suspended stock has a significant and positive effect on the bid-ask spread of non-suspended stocks in the same industry or province. Besides, suspensions lasting for a longer period of time have weaker impact on the liquidity of informationally and regionally related stocks than suspensions lasting for a short period. What’s more, suspensions caused by different reasons have different impact on liquidity of related stocks. For suspensions due to limit hit, they are significantly and negatively related to the spread of non-suspended stocks in the same industry or province. This is due to the fact that according to the regulation that stocks hitting price limits for several continuous days will be suspended what leads to higher predictability of this type of suspension. But suspensions caused by negative news and neutral news have a significant and positive impact on illiquidity of other non-suspended stocks in the same industry or province. Thereby suspensions caused by negative news have a larger impact on the liquidity of informationally and regionally related stocks than suspensions caused by neutral news.

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Thesis (Masters)
Authors:Dong, Yingting
Institution:Concordia University
Degree Name:M. Sc.
Program:Finance
Date:13 June 2019
Thesis Supervisor(s):Gelman, Sergey
ID Code:985697
Deposited By: Yingting Dong
Deposited On:19 Dec 2019 14:26
Last Modified:19 Dec 2019 14:26
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