Overview about Liquidity, Asset Price and Chinese Stock Market

0 INTRODUCTION Liquidity is one of the most fundamental characteristics of financial markets. It is an important element to realize a sustainable and effective financial market (Huang and Wang 2009). However, the lack of liquidity can lead to a financial crisis and even the collapse of the global financial markets. For example, in 1987, long-term capital management (LTCM) collapsed in 1998 (Huang and Wang 2009), the stock market was hit by a lack of liquidity and the credit market changed drastically.

Liquidity is defined as the ability of the market to trade assets without causing sharp fluctuations in the price of the asset. Generally, the value of low liquidity assets (real estate, private equity, gold, etc.) rises faster than current assets (cash, stocks, etc.) due to restrictions on the transactional nature of the asset itself. ...... As asset trading gets faster, prices tend to be more accurate in market valuations and therefore remain stable over time, but will become more unstable in the short term. A good example is the stock market. As an algorithm, real-time trading becomes increasingly common and the overall market volatility sharply increases (as opposed to other assets) - small changes (revenue reporting, political turmoil, randomness, etc.) Have a cascade. effect

Like stock trading, liquidity is a feature of the encryption market. It refers to the extent to which the market allows for the sale and purchase of assets at a stable price. Lower liquidity tends to increase market volatility (especially when making large orders). In general, however, the value of low liquidity assets (real estate, private equity, gold, etc.) grows faster than current assets (cash, due to restrictions on the exchangeability of the asset itself). Stocks, etc.) The higher the liquidity, the shorter the market volatility in the short term will be.

Many Americans agree that the greater the better. This is not different from the stock market. The most valuable part of the stock market is liquidity. Liquidity is the ability to sell assets at a fair price. The bigger the stock market, the more liquid it will be easier to sell the asset at fair value. Liquidity plays a vital role in a successfully functioning financial market. If investors are unable to trade at reasonable prices, investment demand will decline and the company will be unable to raise funds. In addition, liquidity relieves investors. Because I know that investment can be quickly converted into cash if necessary.

Before I explain about profitability, I will look into the science section in detail. Liquidity depends on the ability of the market to trade assets at a price close to the market price. At the same time, the faster the asset is traded, the more accurate the market valuation, so in the long run the asset is more stable, but in the short term it will be more volatile. In other words, once the token enters the open exchange, many people want to sell it to earn money in a short time. As a result, the price goes down. Later, a long-term mechanism will appear in the game. You can earn more income than when the token enters the exchange.