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The Risk Of Stock Market Efficiency - From The Capital Asset Pricing Model To Consider

Posted on:2003-03-28Degree:MasterType:Thesis
Country:ChinaCandidate:H Y WeiFull Text:PDF
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As of the year of 1990, China's stock market has witnessed great progress in its total market value and stock amount. The empirical research on the efficiency of stock market interests many scholars. In this paper, the newest empirical test of Efficient Market Hypothesis(EMH) was done in terms of the empirical test of Capital Asset Pricing Model(CAPM). Because of the logical relationship between EMH and CAPM, we tried to use a new method to find whether the EMH theory is available in China's stock market. We did our research on the basis of EMH(Efficient Market Hypothesis). In the first three chapters, we introduce the definition of efficiency and market risk and the theory of EMH and risk. In chapter 4, we use empirical research to try to find out whether China's stock market is an efficient market. In the last chapter, we managed to put forward some useful idea to help develop the efficiency of China's stock market from the point of view of law, market and political system. In 50's of 20 century, the famous professor Eugene Fama introduced the idea of Efficient Market Hypothesis(EMH), which means that the information available on the asset market can be found in the price of assets without delay and fault. The theory of EMH based the modern financial theory. In the research of EMH, the Capital Asset Pricing Model (CAPM) is very important. The theory of CAPM is based on EMH. If EMH is available on the market, CAPM can be used by the investors to determine the price of assets. On the other hand, if we find that CAPM can not be used on a market to determine the assets, we can be sure that the market is not an efficient market. In the CAPM, β is the ratio of covariance of the return of market index and the return of the free of risk asset to variance of the return of market portfolio. The meaning of β is the relationship of the return of the market portfolio and the return of the individual asset. β measures the sensibility of the individual asset and the market portfolio and represents the systematic risk of the individual asset. Our conclusion is that the CAPM cannot currently be used to determine the price of stock on China's stock market. The meaning of our research is that we introduced the efficiency of market and risk from a new point. We not only described the theory of the EMH, but also we tested the availability of EMH on China's market with the latest data and the latest method. We hope our research will be helpful for research in the field of efficiency of China's market...
Keywords/Search Tags:Efficiency
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