Does reform of non-tradable shares change liquidity premium? Empirical study from China a share market

After reform of non-tradable shares to complete, along with limits sells the stock in batches going on the market, the increase of tradable shares proportion has the remarkable influence on liquidity level in China A shares market, thus also changed the liquidity premium. This paper uses panel data model, selects two liquidity variable from different angle, tests and analyzes the liquidity premium before and after the reform. The result shows that: the liquidity premium exist in market before and after the reform; because of the market liquidity condition improving, negative effect between illiquidity and expected return strengthen, namely stocks with low liquidity have higher expected return.