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Illiquidity and the Risk of Stock Market Crash
School of Economics, Jinan University, Guangzhou, China
College of Commerce, Ningbo University, Ningbo, China
School of Economics, Jinan University, Guangzhou, China
- 1 School of Economics, Jinan University, Guangzhou, China
- 2 College of Commerce, Ningbo University, Ningbo, China
- 3 School of Economics, Jinan University, Guangzhou, China
American Journal of Industrial and Business Management·Volume 10 (2020)·Pages 421–431·Published 4 February 2020·DOI10.4236/ajibm.2020.102028
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Abstract
This paper aims to study the impact of illiquidity on the risk of stock market crashes. Through empirical research on daily and weekly data of the Shanghai Composite Index, it is found that high liquidity can relieve the risk of stock market crash. For this reason, this article proposes to establish a stock market liquidity monitoring and early warning mechanisms, rationally control market leverage, and strengthen supervision of hot money.
KeywordsStock Market CrashIlliquidityMarket Risk
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