Weak Efficiency On The Chinese Stock Market

Through the analysis of validity of trading rule based on technical analysis, we systematically study the weak-form efficiecny of China's stock market and compare it with other countries.This study is divided into two parts and the first part is about trading rule's performance on the stock market index, which is determined by the conditional distribution and mean of return and the'non-profit-transaction-rate'.While the non-profit-transaction-rate is also used as a proxy for the relatively weak-form efficieny in its standardized form.The second part are focused on the performance of trading-rule on individual stock.Study on validity and effectiveness of portfolio based on trading rule is also performed.This part of the study is based on the'no short, no borrowing' hypothesis, using actual transaction rates and risk-free interest rate.Our empirical results,show that China's stock markets haven't reached the weak-form efficiency in terms of absolute return of trading-rule,relative efficiency or trend of efficiency. Under the condition of 'no transcation cost, no short', all trading-rules get return beyond the index. While the variable moving average rules can defeat the benchmark in the whole inspection period, using Sharpe ratio for measure.In 28 indices, which belong to 25 countries, the ranks of weak-form efficiency of Shenzhen and Shanghai markets are last 3rd and last 4th, only higher than Malaysia and Singapore.In 1998 to 2009 period, the trading-rule's relative performaces in China increased significantly and China's efficiency rank dropped severely, even to the last 1st in the last sub-period from 2006 to 2009.