A Study On The Efficiency Of Chinese Security Market

According to the degree of fluctuated stocks price to different kinds of information collection,the efficient markets hypothesis divided markets into Weak form of efficiency, Semi-strong form ofefficiency and Strong form of efficiency. From the beginning, the efficiency of Chinese stock marketbegets various arguments. This thesis will discuss it in four chapters.From the efficient markets hypothesis, Chapter one has introduced the meaning of whetherChinese stock market is efficient or not. It also generalizes the methods and conclusions to thissubject existed in academic field, points out the common defects of existing research and elucidatesthe research frame of this topic.Chaper two tests the efficiency degree of Chinese stock market with the demonstrative analysis.With the methods of establishing an investment combination to cast about for excess return,analyzing the real exchange data of Chinese stock market from the end of June 1997 to the end ofJune 2000, it is eventually turned up that there exists a long-run tranquilization of investmentstrategy that may gain excess return. Depending on the analysis above, it is considered that theChinese stock market has neither reached the semi-strong form of efficiency, nor reached the weakform of efficiency. According to the farther research, it still lacks the evidence that the efficiencydegree of Chinese stock market has been elevated. Moreover, it puts forward questions, such as whythe business behavior of the investor, who go in for the max-profit, couldn't eliminate the excessbenefit and why the efficiency of Chinese stock market is still low since 1999, after endeavors formarket economy in stock market for nearly two years.Chapter three mainly explains the inherent microcosmic foundation of the excess return existingin investment strategy founded out by chapter two. After analyzing the component of participators,the main body, including institutions and individual investors, the model has been refined. Afteranalyzing the Nash-equilibrium of complete information static state game, sub-game perfectNash-equilibrium of complete information dynamic state game and its expanding form, this partpresents out the formula of the institutions' profit. On the one hand, this part shows why theinstitutions, which seek for max-profit, always manipulate stocks, which has the lower market value,and make the lower market value stocks has excess return. On the other hand, this part demonstrateswhy the asymmetric information about the between institutions and individual investors behavior ofinstitutions results that individual investor's action of "guess the banker" becomes ineffective. And,this kind of excess return couldn't be cleared up by competition, which corroborates the conclusionpromoted in chapter two.Chapter four mainly presents the policy suggestion, which could elevate the efficiency ofChinese stock market. It points out that the market structure, of which the proportion of institutionsis too low, is the basic reason of inefficient market. The common existing rent-seeking, thestate-owned stocks and corporation-owned stocks incapable of circulating in market are actualreasons which result in rent-seeking widely. It also explains the reason that why they wouldn't enterinto the stock market even if the others admire the institutions' excess return from stock market. Thepolicy could be concluded that: firstly, presenting ajudgments standard to the pathway of expandingthe scale of institutions and new stocks; secondly, keeping on introduce "eXternal persons" andincreasing the degl-ee of center gOvemment's attention on stock mnrket; finally, this paper (1ivides thecirculating problems of the state-owned stocks and the corPoration-owned stocks into the existingpart and the increment part and reviews former policies seriously, as well as puts forward two sets ofintegrated schemes, including a scheme which meets the benefit of all people during transitionalper...