Research On The Effectiveness Of China's Warrants Market

As an effective way to solve the problems of split shares, Warrants has once again landed on China's stock market stage in 2005, Development to date, the trade volume and turnover of warrants market is increasing continually, playing an important role in securities market. But the signs fully demonstrated the validity of the Chinese warrant market is relatively low; there has been a series of problems such as a huge gain in the first day of listing and volatile market prices. Not only does the low effectiveness of warrants directly affect the investment decisions of investors, but also has a negative impact on efficient allocation of resources on the financial markets, therefore, how to objectively evaluate the efficiency of warrants market, to improve its effectiveness naturally become theorists and practitioners'focus of attention.Paper defines the connotation of market efficiency and cards systematically the efficient market theory and it's testing of related theories, on the basis, conducts an empirical study on the effectiveness of warrants market in China with using random walk model, co-integration test model and the GARCH model, the results showed that fluctuations in the yield of a small number of warrants in the market does not obey random walk process, there is no co-integration relationship between the market price of most warrants and the underlying stock price, the earnings rate of most warrants showed a significant clustering of volatility, warrants market in China initially have a Certain characteristics of weak-form efficiency, but haven't yet reached the weak-form efficiency.Paper analyzes the reasons for the low effectiveness of the Chinese warrants market, finds that warrants market supply and demand imbalance, trading mechanism defect, make the introduction of warrants products be vulnerable to the pursuit of a large number of speculative funds, causing market price volatility, but non-rational behavior of investors further aggravates excessive fluctuations of warrants market price, leads to an atmosphere of intense market speculation, makes warrants market have lost the basis for effective operation, coupled with weak market regulation is difficult to curb market speculation, results in eventually that warrants market in China is the low efficiency of running. Therefore, on the one hand, must increase the number, variety of warrants and expand the size of the market to increase market supply, at the same time establish and improve warrants creation institution and market short selling mechanisms, build market-maker system, improve the price discovery mechanism; on the other hand, must strengthen the supervision of warrants market, regulate investor's behavior, improve the external environment of warrants market, so that makes the function of warrants market obtain a maximum exertion, improves the effectiveness of warrants market, promote rapid and steady development of China's Stock Market.