Professor Zhang Wei Talks about “Liquidity Stampede Crisis in Stock Market” on the 12th Chinese Finance Annual Meeting

　　"To recognize this stock market crash, especially the formation mechanism behind the liquidity stampede crisis may help reduce these disputes," Professor Zhang Wei said in the report at the 12th Chinese Finance Annual Meeting.

　　The 12th Chinese Finance Annual Meeting was held in Wuhan by the end of October, 2015. Nearly four-hundred experts and scholars from home and abroad well-known universities gathered together to exchange views about finance, conducted a heated and in-depth discussion focusing on key, hot and difficult problems in financial sector under the context of “new normal”. Dean of CoME, TJU, Professor Zhang Wei and seven teachers and students attended this meeting and invited to deliver a lecture entitled “Liquidity Stampede Crisis in Stock Market “at this meeting.

　　Professor Zhang Wei reviewed the "liquidity stampede " phenomenon in stock market in the first half year of 2015, and pointed out that there are three distinct characteristics in this crisis: sharp fall of unilateral prices in this crisis; the vast majority of stocks limit at the same time, the order book was empty, liquidity depletion of GEM board infects to the SMES Board and mainboard, the overall market collapsed due to lack of liquidity; and slow recovery after the crisis.

　　On the basis of the existing literature, in the background of multiple assets, constitution of Chinese characteristic investors and specific microscopic mechanisms of market, by constructing a computational experiment finance model, Professor Zhang Wei linked the lack of market liquidity with irrationality of investors and financing leveraged trading behavior, and formatted a novel explanation of "liquidity stampede crisis "; and according to this explanation, he advocated measures to introduce temporary market makers to provide emergent liquidity and forced liquidation through the acquisition of block trading system, in order to reduce the impact of liquidity.

　　By means of computer simulation, this model vividly describes the formation mechanism and characteristics of liquidity stampede crisis, visually demonstrates the mechanism of this stock market liquidity stampede, and the effectiveness of the proposed countermeasures. Professor Zhang Wei said that in the future a big-scale real finance – economy calculation system experimental platform and Decision Theater can be built including capital markets, currency markets, foreign exchange market and commodity markets, to further study the system risk rules of macro economy.