Study On Abnormal Return Of The Security Market In China

We take abnormal return as the main topic of this paper. On the basis of summarization of foreign and domestic research about security market and the Efficient Market Hypothesis, the paper discusses the existing and cause of formation of abnormal return in Chinese stock market. The paper uses both qualitative analysis and ration analysis to test market efficiency and abnormal return in the market. The results indicate that there exist arbitrage opportunities in Chinese stock market, and investors could obtain abnormal return if they select certain stocks in certain times. Our empirical findings are: 1. the stock market of China doesn' t achieve weak-form efficiency; 2. investors who use value investment strategy and small firms strategy can obtain abnormal return in market; 3. although technical analysis is not significantly effective in the whole period, it shows superiority in bear which can obtain abnormal return; 4. the market exists overreaction, and contrarian investment strategy can produce abnormal return; 5. the market does not obey normal distribution, Shanghai stock market exists positive Friday effect, negative July effect and early-month effect, what' s more, policies also have significant influence on stocks, so investors can make use of policy effect to obtain abnormal return.The research of abnormal return in stock market of China have important theoretical and practical meaning. If we can find out factors that affect market efficiency, it is easier for us to understand and evaluate the market correctly and objectively, and for government to make proper market supervision policies. Based upon the above empirical results, the paper tries to explain the cause of abnormal return in the following four aspects: institution, market structure, investors' behavior and information publishing. The author considers that the four factors have radical influence on the formation of abnormal return in Chinese stock market, and have unique features different from mature market. In the last part of paper, the author puts forward corresponding suggestion about controlling abnormal return.