| Finance studies the issue that how to arrange the capital resources, and we often use the efficiency to measure the capital arrangement. Fama(1970) proposed EMH provide us a reasonable efficiency measure frame. It proves that if the stock price reflects all the information, the stock market will be efficient market. Neither historical price nor historical volume could be used to forecast current price.But the true world could not be completely efficient, investors usually consider there is information about expected yield in the trading volume, the expected yield can’t expressed by the volatility of stock price. So, the investors focus on the direction and volatility of stock price with trading volume, they try to find the rule of volume-return relation and get the excess return accord the rule. In this paper, our aim is to use the EMH and the volume-return rule to depict the path of China A share stock market’s development.Osborne (1959) is the first one who build framework of volume-return, after his study, others build a lot of frameworks to interpret and test volume-return of developed country, and they find that even in Europe and America’s developed stock markets, they also appears marked volume-return rules. China’s A share stock market comes into existence in the year of1990, comparing to the developed financial market, it still shows many deficiencies. These deficiencies conclude differences on the micro structure of financial market, efficiency of pricing, liquidity of stock market, choice of investors et al. So, we should ask whether there is volume-return relation in China A share? Whether institution breaking, micro structure of financial could affect the volume-return relation dramatically? And how can we use the relation to estimate the efficiency of China’s A share stock market? It is our work to answer all the questions.According to the logic rule, we have six chapters in this paper.Chapter one introduces the background and the methods of study, structure of this paper, and this paper’s innovation and drawbacks.In chapter two we present the literature on the EMH and volume-return relation. We first introduce the studies of the EMH, include the theorem’s content and hypotheses, and the type of efficient market. Then we sum up the existent conclusions of EMH test. After that, we summarize the academic and testing literature on volume-return relations, there we emphase trading theories, information theories, dispersion beliefs theories and testing results following them. At the last part of this chapter we comment on their deficiencies.In chapter three, we mainly introduce the developing course of China A share markets through important events as symbols, and we pay many attentions to two pivotal events:Price limit system put forward and the reform of the shareholder structure of listed companies. In the following analysis, we will do demonstrations in three different time sections which divided according these two time points.We put forward three testing hypotheses according to the developing situation of China A share market and the EMH and the theories of volume-return relations in chapter four, based on our judgement, we suppose that:(1) the historical volumes should be positive correlated with today’s returns from1990/12/19to1996/12/15,(2) the historical volumes would be negative correlated with today’s returns from1996/12/16to2005/04/28, and (3) there would be no relation with volumes and returns from2005/04/29to2010/12/31. We introduce the paper’s academic model--CGW(1993) model in succession, include the model’s hypotheses, conclusions and how to deduce those conclusions. In the end of this chapter we choose the variables of volumes and returns to be tested and give those statistical pictures.Chapter five, we test three hypotheses mentioned in chapter four using index volumes and returns data in China A share stock. We do the empirical word following three steps:(1) auto-correlation test of index returns,(2) volumes and returns test of market index, and (3) stability test.According the auto-correlation test of index returns we could conclude that:(1) before the price limit system putting forward the Shanghai Stock Exchange market dose not reach weak form efficiency, and after that time, until2010/12/31we can not judge how the efficiency of Shanghai Stock Exchange market changes.(2) Before the reform of the shareholder structure of listed companies, we could not judge how is the efficiency of Shenzhen Stock Exchange market, but after that time, we could get that the Shenzhen Stock Exchange market is in the situation of Weak form efficiency.According the volumes and returns test of market index, we infer that:(1) Before the reform of the shareholder structure of listed companies, Shanghai Stock Exchange market dose not reach weak form efficiency, but after the reform, we find that there is not obvious relation between volumes and returns, this may be caused by the market efficiency advance.(2) From1996/12/15to2010/12/31, historical volumes are negative related with today’s returns, it means in this time section Shenzhen Stock Exchange market is not weak-form efficient, and the reform of the shareholder structure of listed companies did not improve the Shenzhen Stock Exchange market’s efficiency.In the last chapter, we conclude the results of this paper, and put forward the intending direction of the study.The innovation of this paper mainly exhibit as three points:1. From the EMH we know that, if the stock market is weak-form efficient, then we could not find any relation between historical volumes and today’s price. Most of existing studies use the auto-correlation test to judge whether the market is weak-form efficient, but this judgement is only based on the EHM’s necessary condition but it is not sufficient. In this paper, we use the test of volume-return relations to check how the market efficiency changes, especially we could judge that whether a policy improves the market efficiency.2. Use volume-return relations test, we get some results which auto-correlation test could not infer.3. We do empirical work distinguishing the Shanghai Stock Exchange market and the Shenzhen Stock Exchange market, and get the results that the same policy for stock market may bring on different results to these two markets.There are three main drawbacks in our paper:1. We just use historical volumes and today’s returns to test how the market efficiency changes, but it is not imply that we could not describe the market efficiency through the relations of today’s volumes and today’s returns, we use the former only for the reason it shows easy to get the conclusions. Maybe there are other interesting results when use the latter method.2. We use market index to test the volume-price relation in China A share market, but not consider what will be show when use individual stocks. 3. When we choose the samples, we use1996/12/16when the price limit system putting forward and2005/04/29when the reform of the shareholder structure of listed companies carry into execution, we do the choice just because for subjective judgement, maybe there are another important time points we missed. |
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