'llliquidity premium' in chinese stock market

摘要

To explain the phenomena of "illiquidity premium" in Chinese stock market,a GARCH-M model after liquidity adjustment for the return and risk series and two hypotheses about the illiquidity premium was established.Empirical evidence showed that the hypotheses are reasonable,i.e.expected market illiquidity positively affects ex ante stock excess return,suggesting that expected stock excess return partly represents an illiquidity premium,also,stock return are negatively related to contemporaneous unexpected illiquidity.