Abstract: Liquidity is the important property of stock market,but it is difficult to define and measure liquidity. In this paper,according to the price impact of investor,we define the liquidity risk and design two in-dices Q and Q_var measuring liquidity risk of portfolio.In the end,we do some empirical research using the data of some sample stock in Shanghai Stock Exchanges,and draw a conclusion that diversification not only can reduce price risk,but also can reduce liquidity risk.

Key words: liquidity, liquidity risk, portfolio, diversification