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Empirical Work On The Efficiency Of China Stock Market

Posted on:2005-09-10Degree:DoctorType:Dissertation
Country:ChinaCandidate:Y L ZhaoFull Text:PDF
GTID:1116360125450952Subject:Quantitative Economics
Abstract/Summary:PDF Full Text Request
Stock market has been the most important issue addressed by either theoretical or empirical study during establishing market economy in China, starting with argument relevant to its quality, status; following diverge about its function. How to evaluate it reasonably and improve its function of distribution for resources not only relates to stable development of macro-economy, globalization of finance but also will be the key for economic reform and establishing modern corporate governance in China. Efficient Market Hypothesis (EMH) remains a highly contentions issue in financial field, holding its serious influence. The aim of this thesis is to evaluate efficiency in Chinese stock market using empirical methods and to give some advices to improve its efficiency in the term of financial innovation through investigation its history and change of trading policies.The motivation of this thesis is to present evidence of empirical study in Chinese stock market from investigating concept, classification, origin, development and purport of Efficient Market Hypothesis (EMH). Compared with other theories, some limitation has, then, been pointed out. Empirical study, relevant to distribution nature of return series and choosing reasonable return equilibrium model, would be the direction for development of EMH.Summarizing systematically national and abroad scholars' results, discussed the relationship between EMH, random walk theory and empirical statistical test. The following partitions described methods and data for empirical study in the term of Econometrics.For empirical study of EMH, this thesis, firstly, reviewed all investigation of Chinese stock market during last decade, comparing the methods, models and data that they used and results. Staring with analysis of volatility in the market, to choose relationship analysis and ADF test to draw the full statistical picture of Chinese stock market. The results showed that return in Chinese stock market had significantly seasonal volatility with right bias, high kurtosis and thick tail. The market generally increased with more rise than fall. There were phenomena of rise and fall dramatically during its history. Return of Shanghai Stock Exchange Index and Shenzhen Stock Exchange Index performed similar statistical characteristics. So we chose Shanghai Stock Exchange Index as sample, divided into three periods by change of trading policies. The empirical study tested market's period volatility based on relationship test, histogram analysis and GARCH model. Q-statistic, CJ ratio, Run Test and Variance Ratio had been employed to test whether or not Chinese stock market reached Efficiency in three periods. The testing results showed that Chinese stock market did not perform Weak Form Efficiency but quite near. Improving of market efficiency had been found through time moving. Furthermore, market trading system efficiency and policy efficiency were tested and provide a way toevaluate trading policies by classification of period.After test of Weak From Efficiency in Chinese stock market, Event Study was employed, which tested influence for market efficiency by public information announcement to exam whether or not Chinese stock market reached Semi-strong From Efficiency, choosing seasoned equity offerings (SEO) as sample. Companies quoted on Shanghai Stock Exchange and Shenzhen Stock Exchange releasing news of SEO within 2000 and 2002 were chosen for sample. Comparing entire observation with different size observation's cumulative abnormal return (CAR), the results showed that market did not react before its announcement, which usually happened in overseas stock markets. In spite of drop it is not statistically significant, which means Chinese stock market reached Semi-strong Form Efficiency within the period chosen. By stationary CAR after announcement, market efficiency was improved. The degree of efficiency in Shenzhen Stock Exchange was lower than in Shanghai. The difference between two markets was not significant. The size effect has clearly been found in tes...
Keywords/Search Tags:Efficiency
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