The Empirical Research On Holiday Effect In The China's Stock Market

Traditional Financial Economic Theory in the rational man hypothesis and the efficient market hypothesis as the basic theory to establish a relatively perfect system, which plays an important role in economic development. However, more and more market anomaly has been proven, which challenge the efficient market hypothesis. Traditional Financial Economic Theory of legitimacy being questioned. Behavioral Finance Theory as a cutting-edge research is developed on this question. Behavioral finance scholars has been developing a new theory by better approaching the real insight into the theory of market anomaly, such as asset prices reflect the over-reaction and under-reaction, momentum effect, the equity premium puzzle and calendar effects, and so on. And so far, some results have been achieved.As one of the market anomaly, the effect of holidays attaches many researcher's attention in recent years. More and more of the confirmed effect of holidays have been shown to demonstrate the ineffectiveness of the market, suggesting investors may therefore have excess benefits. Therefore ,the researching of the existence of effect of holidays in stock market and other Market Economy have important theoretical significance for improving the Behavioral Finance Theories in market anomaly. This research can help develop the behavioral finance theory and provide reference to improve the market mechanism, it also guide the investors to make better investment decisions.Based on the traditional economic theory, stock market anomaly is introduced in this paper, especially; the holiday effect is discussed in detail. The newest theory of economic is Reviewed and consolidated in this paper. Based on this theory, the virtual variable regression method is established, which is used to analysis the Shanghai A-share day returns data. Make an empirical study to holiday effect of China's stock market to four major holidays. Two main forms of virtual variable regression model is used in this paper, one simple linear regression model, the other is GARCH model. For the GARCH model, further distribution of the different assumptions is taken into account in order to examine the distribution of different assumptions would affect the empirical results. The empirical results show that the festival is a strong presence; the Chinese stock market has not yet reached the real weak form efficiency.In the last of this paper, some unique views of the operation mechanism in China and the reason of holiday effect is proposed. Also noted in the theoretical and empirical research on the holiday effect there are many areas for further deepening and expansion.