Empirical Research On Market Efficiency Of Chinese Convertible Bond

Convertible bond is a security between stock and debt, which has great flexibility because of its options, equity-likes and debt-likes. Convertible bond has a gigantic market share in the world. In our country, though as a new original, it develops very quickly. Now there are 52 convertible bond have been issued and more 63.296 billion been raised up to Dec 31st, 2006, convertible bond market has formed.As a new financial tool except stock and debt, Convertible bonds become an important constituent of security market and begin to play an important role in the security markets of China. Convertible bonds have been paid more attention by the ordinary investors and Institutional Investors, at the same time, QFII have also stepped in convertible bond market relying on their superiority of specialize and information. Especially, the transaction of stock market is more frequent, on the condition of the share merger reform, and now China capital market is facing the boom of convertible bond financing. The rapid enlarging convertible bond market has played a critical role in the healthy development of Chinese capital markets, which will be shaped in a more perfect, standard manner by the trend.Many evidence have show that we should examine the efficiency of China convertible bond market, to explain the motive to invest convertible bonds of Institutional Investors and provide some reference to ordinary investors and supervising﹠managing department. The researching on efficiency of convertible bond market can also promote the convertible bond market's healthy development, and coordinate the bond market's development with stock market's development furthermore.With the current situation, we have introduced the concept, nature and value of convertible bond, and carefully compared domestic market with foreign markets in terms of development status. Then we have demonstrated the market efficiency of China convertible bond market with ADF method, and further analyzed the relation of convertible bond market and stock market. Finally, we have analyzed the problems of convertible bond market, and given some suggestions on how to further develop domestic convertible bond market.