Empirical Research On Efficient And Fractal Market Hypothesis In China Market

Efficient Market Hypothesis thinks investor can make quick and non-bias estimation on attainable information, capital values fully reflect all the public information. In the process of development there are three types of efficient market model: expected return model, random walk model and downside martingale model. And random walk model and downside martingale model are the extend of expected return model. For the market price's random walk must be in the efficient market, so we often take random walk model in the efficient market.With the development of financial theory, efficient market hypothesis takes great challenge in every way. In this background, some researchers put forward the Fractal Market Hypothesis, that is , market price fluctuation processes by fractional Brownian Motion, and the orbit is stable Pareto Distribution with α <2 character Its market environment is:1 .The aim of market being is to provide a stable and liquid market for exchange. When the market is composed with all kind of investor, it must be stable and prove the market capital are full liquid.2.To short-time investor, they are think more of information about market emotion and technical factor. So, the same information has great different impaction on the behavior of different period investor.3. When long-time investor questions the efficiency of basic information, sometime they must stop the business, or turn to be a short-time one. Because of these, the market became an unstable one. So, we conclude that we couldn't insure the full liquid of market lacking of short-time investor.4.In the market, capital price is the result of both the short-time technical exchange and long-time basic estimation. Comparing with long-time exchange, short-time market price takes care of volatility. There have no explain of that short-time continuance length have relative with long-time economic period.5.If capital price has no relative with economic cycle, the market have no long time period, and the exchange, liquidity and short-time information will occupydominant station.In this paper , we combine both Efficient Market Hypothesis and Fractal Market Hypothesis to test our bond market's return distribution , the main results are that the index of Chinese bond market process by fractional Brownian Motion, the orbit is stable Pareto Distribution with α <2 character So, the fractal market hypothesis is more suitable than the efficient market hypothesise...