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Does the opening of the China's stock market improve market liquidity?

Author

Listed:
  • Wang, Yubin
  • Gu, Wenhao
  • Ma, Baolin
  • Sun, Guangyu
  • Kang, Xinyi

Abstract

This paper examines the impact of three major policies—namely, the Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong Stock Connect, and the inclusion of A-shares in the MSCI Index—on China’s stock market liquidity. Employing the Amihud illiquidity measure and a difference-in-differences (DID) model, the study assesses the impact of these policies. The findings reveal that the first two openness policies significantly enhance market liquidity, which in turn facilitates further opening of the stock market. Moreover, stock market liberalization improves informational efficiency and reduces market fluctuation.

Suggested Citation

  • Wang, Yubin & Gu, Wenhao & Ma, Baolin & Sun, Guangyu & Kang, Xinyi, 2025. "Does the opening of the China's stock market improve market liquidity?," Finance Research Letters, Elsevier, vol. 85(PE).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pe:s1544612325015272
    DOI: 10.1016/j.frl.2025.108273
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    References listed on IDEAS

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    1. Ling, Aifan & Guan, Huihua & Zhang, Nannan, 2026. "Brand capital and corporate stock risk: A theoretical and empirical analysis," Research in International Business and Finance, Elsevier, vol. 81(C).

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