| A mature bond market is a cornerstone of the country’s financial markets and the implementation of national macro-control conduction important carrier of the central bank’s monetary policy. And it plays a vital role in the long-term development of the entire country’s financial market. In recent years, China’s bond market has been developed rapidly, its scale greatly exceeds the scale of the stock market, which exceeds the scale of the bond market just years ago. China’s bond market is mainly composed by the inter-bank bond market and the exchange bond market. And the inter-bank bond market accounts for about90%of the entire bond market securities depositories and volume of trade. Inter-bank bond market is the main body and core of the entire bond market in China.China’s inter-bank bond market is formally established in1997. In the1990s there had been many violations like "the three hundred twenty-seven treasury futures", a large number of bank funds were made into the stock market through a variety of channels. In consideration of controllable risk in the bond market. In1997the People’s Bank of China made the commercial banks to withdraw from the exchange bond market. And the centre bank made the establishment of the inter-bank bond market which makes the formation of inter-bank bond market and the exchange bond market coexist in the China’s bond market, but the market is split pattern. After more than ten years of development, the inter-bank bond scale has leaped to third in the world and second in Asia. In the background of the effectiveness of the ladder of development, the large changes in the financial environment and the bond market segmentation, how is the market efficiency of the inter-bank bond market? Compare with another bond sub-market which is exchange bond market, what is the comparative efficiency and the linkage between the two markets? These questions are urgent problems for us to answer. Most of the studies of the effectiveness of the domestic market are focused on China’s stock market, part of the research for the bonds is also based on the exchange bond market. There are few studies of the effectiveness of the inter-bank bond market and most of them are qualitative analysis. And the study period are generally in the initial stage of the bond market. In this paper, the efficiency will be based on the classic theory of efficient markets empirical test in China’s inter-bank bond market and found prices from pricing efficiency point of view of its linkage with the exchange bond market. There are mainly empirical analysis, supplemented by qualitative analysis.This article first reviews of relevant theory and literature on the validation of the market, and clear and definite the meaning of the efficiency in this study, which reflected external efficiency in the West and Tinic’s market efficiency classification who are scholars major in finance. This paper summarizes the meaning of the classical efficient market theory and its subsequent development, and then reviews the existing literature of the efficiency of the relevant market, and compares previous approaches and methods on the market efficiency. Then this article introduces the current situation of the inter-bank bond market and analyze the its state of development, organizational structure and the bonds issued pricing mechanism. In the first section of fifth chapter of this article, it compares the inter-bank bond market with the exchange bond market in the context of bond market segmentation.Fama’s Efficient Market Hypothesis is analyzed in the study. The suitable empirical testing methods are picked out, which are descriptive analysis, run test, sequence correlation test and the variance ratio test. These empirical test results show that the bond price behavior of the four types of bond are not in line with the random walk test The empirical test results show that China’s inter-bank bond market has not yet reached the wear-form efficiency defined by Fama and there are no significant difference between the empirical test results of four types of bond. In the GARCH model analysis, the empirical test results show that the GARCH models are able to represent the volatility of the bond price suitably. That is to say, the currency price can be predicted by the past price. In the GARCH-M model, the empirical test results show that the premium of the risk is not reasonable and there is unwise behavior in the bond market. In the R/S analysis, the Hurst exponent of the four types of bond is greater than0.5, indicating that there is long-term memory in the yield of the bond market. The result also reflects the inter-bank bond market has not yet reached the weak-form efficiency. In the end of the chapter, it gives some reasons and analysis for the actual status of the inter-bank bond market.In the VAR model, which is used to research the relation in the information efficiency and price discovery between the pricing efficiency of the inter-bank bond market and the exchange bond market, the empirical results show that the inter-bank bond market and the exchange bond market influence each other and there is a long-term equilibrium between them. In the short term, the market pricing efficiency of the inter-bank bond market is lower than the market pricing efficiency of the exchange bond market and the exchange bond marke has the competitive advantage in the short-term price discovery, In comparison with the results of previous studies, the empirical results in this article reflect that China’s inter-bank bond market efficiency has been improved in recent years and there is a moderate decline in the degree of the bond market segmentation.In the end chapter of this paper, it concludes the paper and gives some suggestion on the future research in this area. |
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