China's Securities Market Validity Study

This paper start with stock market price behavior, we assume that stock price obey two basic conditions: one is successive change price is independent and the other is stock price obeys some kind of probability distribution. We take advantage of data of our stock market price and test the distribution of price change, then through the frequency distribution and normal probability paragraph, we describe impressively the phenomenon of leptokurtic and fat-tail what our stock market price possesses, that is, there are too many values near the mean and too many out in the extreme tails. The differences possibly owing to some different distribution that with the same mean but different variance, or different risk that listed companies possess, so as to mean is different in different period too. Mandelbrot studies these extreme value, and proposes one better model that can describe the distribution of stock price change, that is stable paretian distribution.the distribution of stock price change possibly display some degree of dependence. Through serial correlation of price change and runs test, chapter two tests this dependence, and found that dependence of price change is not obvious, not enough to explain the reason of this deviation. As the serial correlation and runs test in relation to the complexity of the stock market seems to be rather rough, then the article describes Alexander's filter method to test the profitability of the investment strategy. Distribution of successors to large value is introduced to describe the changes in stock prices.After describing detailed the stock price change, this paper introduces the main content of the theory of efficient markets. First, the introduction of three kinds of mathematical models to describe the efficient market hypothesis, that is fair game models, Sub-martingale models and random walk models, for successive study in the efficient market theory, quantitative study has been laid. Weak-form mainly test past return which based on the price and volume information of the stock market, then we introduce the predictability of inter-period rate of return, our article introduce three pricing models, that is SLB, multi-factor model and consume-oriented model. Changyun and Shengtying Chin tested weak-form of our market, start with the relations of price and volume, and found that investing stocks with lower trading volume receive higher return than higher volume stocks.semi-strong form mainly study whether we can receive excess return if we take advantage of the information that publicly proclaimed in the market, Fama has found that the return we invest stock that has been spited was significantly higher than the market average rate of return. The article examined the relationship between China's macro-economic and stock market price index, found that the two factors have no significantly relation; on the contrary, policy of our country has stronger effect. strong-form mainly test profitable of insider information, through the research of our country's fund, we found that our market does not exist smart trader, who can continuously obtain higher average return than market average return. Then we introduced the rise of behavioral finance research in western countries in recent decades.China's stock market is still in a relatively low level efficiency. We must start with the innovation of our stock market trading system, the whole shares tradable, decrease of direct government intervention and the cultivation of valuable investors, so as to enhance our market's efficiency.