An Analysis Of The Non-effectiveness Of China Stock Market

In past ten years, with the deepening of economic and financial reform, the stock market of China grows rapidly from scratch, from small to large, from regional to national. As the main content of China's capital market and perfection of the market mechanism, the stock market has become an indispensable element of the socialist market economy and changed the way of financial management to some extent, securities investment has won popular.However, China's stock market is an emerging and transitional market developing in the process of economic reform and market transition, which has certain specificity in structure and operation caused by the endogenous and exogenous flaws and defects that embodies in trading activities and price fluctuating. In contrast to foreign mature stock markets, the phenomenon of price co-movement like "plate co-movement" and price synchronicity usually appear in China's stock market, the impact of market significantly overwhelms the independence of individual stocks; thereby restrict the efficiency of stock market.As we know, the most basic function of stock market is the price discovery function. Information is the decisive factor in price fluctuation, and the stock price also delivers all kinds of information to investors in the same time, the changes of macroeconomic condition, policies and company benefits directly determines the trend of market. If the stock price can reflect the messages accurately, timely and fully, namely if the stock market is effective, then the price fluctuation of different companies should show different characteristics considering the diversity of industry characteristics, financial conditions, growth opportunities and the correlation of company operation and macro-political and economic situation. As the fluctuation of stock price and the information efficiency are closely linked, therefore, in theory, the synchronicity of stock price fluctuation is essentially a form of market non-effective behavior, in turn, inhibiting the effectiveness of the market.Then, what is the relationship between the synchronization of stock price fluctuation and the efficiency of China's stock market? Why does the price fluctuation of different stocks present a remarkable synchronicity? Why does co-movement phenomenon exist in price fluctuation of different stocks especially when there is no correlation between their basic conditions? Has the degree of synchronicity been reduced with the improvement of stock market and stronger sensitivity and awareness?This paper intends to study the non-effectiveness of China's stock market by use of price fluctuation synchronicity as a measure of market efficiency in the special background and environment, make a concrete analysis of the relationship between synchronicity phenomenon and the non-effectiveness of stock market mainly from aspects of major functions like price discovery, resource allocation and the perfection of corporate management mechanisms, in the basis of a systematic overview of market efficiency theories and relevant researches, then do some empirical tests on the current extent of synchronicity and industry differences existing in price fluctuation, and on the correlation between stock price and operating performance, and consequently provide support to understand China's stock market in depth and market reform.The results show that China stock market still has a high synchronicity of price fluctuation, and there is no significant industry difference existing in price fluctuation, and thus inhibit the market efficiency to some extent, which is expected to be improved. However, by sampling test this paper also finds a long-term stability between stock price and the performance of companies. Thus, perfecting information disclosure system, improving the quality of information, investors, and the use of financial information will help enhance market efficiency.