The Empirical Research On Efficiency Of China’s Growth Enterprise Market

Whether the stock market is effective is very important for investors, marketregulators and other market players. If the stock market has reached a state of the weakform hypothesis, the technical analysis which depends on the object of historical price ortrading volume can not predict the price. So the investors can not obtain the long-termextra profits by technical analysis. Conversely, if the stock market is invalid, investors cantake advantage of the technical analysis and historical information to look for undervaluedstocks, and thus acquire excess profits.China’s growth enterprise market(to be referred as CGEM) founded on October30th,2009. CGEM is quite different from the main board and other growth enterprise markets inthe aspects of the conditions of listing, delisting system, sponsor system and so on. CGEMis an important part of our multi-level capital market. Whether CGEM is up to weak formefficiency is significant not only for the investors，but also for the regulators.There are a variety of test methods of market efficiency. They all have advantagesand disadvantages. The joint use of several methods is helpful to the study of the problem.The paper selected the distribution test, the autocorrelation test, the unit root test and theruns test as main test methods. We used the four test methods to test the effectiveness ofCGEM. Then we compared CGEM with Hong Kong Growth Enterprise Market andNASDAQ, and offered proposals that can enhance the efficiency of CGEM according tothe results.The article is divided into five parts. The first part mainly expounds the research’sbackground, significance, a literature review, the content of the study, methods, andinnovations. The second part is the analysis of the CGEM status. Firstly, we introduce thedevelopment and present state of CGEM. Secondly, we take Hong Kong GrowthEnterprise Market and NASDAQ for instance, and compare CGEM with other growthenterprise markets. The third part is the theory of efficient market. In this part, weintroduce the origin, development， the content and the test methods of Efficient MarketHypothesis. And this is the theoretical basis of the study. The fourth part is the part of empirical analysis. We select the daily return rate and the weekly return rate of the CGEMindex and CGEM comprehensive index, and use the empirical methods described above totest. At the same time we test the daily return rate of the Hong Kong GEM index and theNASDAQ composite index in the same way, and analyze the results of all the tests. Part Vis the analysis of factors affecting CGEM efficiency and the proposals to enhance theefficiency in accordance with the conclusions of the fourth part.From the results of empirical tests, both the daily return rate and the weekly returnrate of CGEM index and the CGEM comprehensive index did not pass the distribution test,autocorrelation test and the unit root test. Only the daily return rate and weekly return rateof the CGEM index and the daily return rate of the CGEM comprehensive index passed theruns test. So we believe that CGEM has a certain characteristics of the weak form efficientmarket, but does not reach weak form efficient market.