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The effect of stabilization fund to rescue stock market based on expected return-capita circulation equation

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  • Wu, Xu
  • Wang, Pei-Yu
  • Wang, Kun

Abstract

This paper builds an expected return-capital circulation equation to explore the impact of using the stabilization fund to rescue the stock market when it crashes. We find that the stock stabilization fund buying the underlying stocks can restrain the sharp decline of the stock index, but it is also easy to promote the fluctuation in prices of small-cap stocks. Therefore, we suggest that the government in use of stock stabilization fund to take control of the stock market crash should not only buy underlying stocks in the index but also pay attention to prevent implicit stock disaster in the market.

Suggested Citation

  • Wu, Xu & Wang, Pei-Yu & Wang, Kun, 2023. "The effect of stabilization fund to rescue stock market based on expected return-capita circulation equation," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).
    • Handle: RePEc:eee:soceps:v:87:y:2023:i:pb:s0038012122003007
    DOI: 10.1016/j.seps.2022.101493
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