At This Stage Empirical Test Of The Effectiveness Of The Stock Market In China

Efficient Market is defined formally by Eugene F. Fama who was an Americanprofessor in finance. The definition is widely recognized by public means in whichmarket the price of a financial asset reflects all the information available and respondsonly to unexpected news. The efficiency of capital market has a significant influenceon investors in their investment principal and method, on the government on itsobjective and way of governance. Besides, efficient market hypothesis is a foundationof modern asset pricing theory. Researches on domestic capital market have beencarried on for about ten years. while there are many disagreements on marketefficiency. So the significance on this research is great in theory and reality.The question of whether or not China's Stock Markets are efficient is bestanswered by a comprehensive and concurrent analysis of Random Walk and RunsTest and Shanghai Stock Index after 2001 till now while using the largest possiblesample sizes. The thesis is comprised of three parts as follows:In the first part, it briefly introduces the definition, forms of efficient markettheory and past empirical research achievements on the efficiency of domestic stockmarket.In the second part, the paper does an empirical research on whether ShanghaiStock Market has attained Weak-form Efficiency through Random Walk Test andRuns Test, but I have not draw identical conclusions. This result probably comes fromtest techniques. Random Walk Test assumes that the residuals followed independentidentical distribution. On the other hand, the Runs Test is a non-parameter test, so it isnot necessary to make assumptions about probability distribution. After analysis, weget that our Stock Market is Weak-form Efficient now.In the last part, it analyzes the reason for the lack of efficiency and how toimprove the efficiency of the stock market.