Calendar Effect Of Chinese Stock Market

Efficient market hypothesis is the basic of modern western financial theory, andit was made by Fama. His definition of efficient market is that if the stock price in astock market can fully and accurately reflect all available information, then we callthe market for the efficient market. Efficient market theory provides a unifiedstandard for judging the efficiency of the allocation of financial resources in a capitalmarket. But the various market anomalies began to challenge this theory. In thiscontext, scholars’ studies on the anomalies of the market at home and broad becomean important part of market efficiency.The calendar effect is an important member of this kind of anomalies; it meansinvestors can construct a portfolio to obtain excess return in a specific period.Calendar effect poses a challenge to the efficient market hypothesis. In order to provethe existence of calendar effects and find its interpretation, scholars at home andbroad make relative studies on the stock market. Calendar effects include week effect,month effect, monthly rotation effect and holiday effect. Based on the24Solar terms,we make an empirical research on China’s stock market, and the stock market of ourcountry is found that significant calendar effects are existed in Great cold period, wedefine this kind of calendar effect as the "Solar term effect".The sample data in this paper is the Shanghai Composite Index, Shenzhen stockindex, Shenwan Large-scale Marker Index, Shenwan Small-scale Market Index andShenwan Agricultural Sector Index return between January1st,2000to December31s2012. And we use a mixed model, combined dummy variable OLS, empirical ARMAmodel and GARCH model, to make an empirical analysis of "Solar term effect" ofevery sample data respectively.In our empirical analysis, it shows that China’s stock market has significant"Solar term effect". The Shanghai Composite Index and The Shenzhen CompositeIndex both reveal significant positive "Solar term effect" in Great cold period. TheShenwan Large-scale Marker Index which represents large companies also reveals significant positive "solar term effect" in Great cold period, while ShenwanSmall-scale Market Index which represents smalle companies shows significantpositive "solar term effect" in Spring begins period. However, we also find that notevery sector index have solar term effect. We focus on the analysis of the ShenwanAgricultural Sector Index and find it does not exist any significant "solar term effect".But we also find the financial service sector, the real estate sector and the miningsector, which represent a large proportion of the total value of China’s stock market,both show significant positive "solar term effect" in the Great cold period.We try to explain the Solar term effect from the perspective of the trade surplus,the cognitive and behavioral biases of investors, the companies’ disclosures, theyear-end bonuses, the consumers’ optimism, the quantified easy money policy, the stockmarket closed institution. Based on the empirical results in this paper, we propose akind of investment strategy: By holding shares in the Great cold period, especiallylarge-scale company stocks, holding small-scale company stocks in the Spring beginsperiod, can obtain excess return. For the stock market inefficiency in our country, weput forward several policy proposals: Improving the the stock market informationdisclosure efficiency, and standardizing the information disclosure institution ofcompany; consolidating the policies issues on economic information management;improving the closing of China stock markets in holidays; further strengthening thecultivation of institutional investors, strengthening the cultivation of personalinvestors; strengthening the regulation of the listing Corporations; making strictpromulgation of the securities listing.