Empirical Research On The Gradually Changes Of Chinese Stock Market Efficiency Indicators

Since the Effective Market Hypothesis(EMH) has been put by American Scholar Eugene Fama firstly, it has already became one of the cornerstones of modern investment and mainstream financial theory after decades of financial practice. It gives us a practical standard to measure how effective the market is, both theoretically and empirically, and this is the prerequisite to almost of all the trading strategies and pricing models we have learned today. During the development of China’s financial market, The effectiveness of Chinese stock market experienced a gradual process. This essay separates the whole history(almost two decades) of Chinese stock market into three phases by several major events in the course of its development, and using unit root test, residual correlation test, fractal test, run test and vector regression model and other methods to test the effectiveness of the market sequentially and analyzed the reason of the results.In detail, first chapter described the background and the importance of the topic which we talked about; Chapter two gave an comprehensive review of the history of the EMH theory and showed other relative theories which challenged it; In chapter three we used a variety of methods to test whether Shanghai and Shenzhen stock market achieved weak form of effectiveness; With the result that we have just got from Chapter three, the forth Chapter used VAR model and impulse response function to exam the semi-strong effectiveness of the target stock market, and characterized the process of the way that the market got more and more effective gradually. The last chapter summarized the conclusion of the whole paper and gave us political suggestion.From the researches mentioned above, we found that China’s Shanghai and Shenzhen Stock market got weak form effectiveness preliminarily since December27,1996, and then reached weak form effectiveness definitely since May9,2005for all kinds of tests demonstrated the same result. In semi-strong form effectiveness test, we found that the degree of the market effectiveness showed a significant strengthening trend since May9,2005(the third phase), inadequate and overreaction toward the basic macroeconomic variables and the corporate specific information has improved significantly, thus, the reaction of the stock prices is becoming so fast that it is very difficult for investors to achieve sustained excess returns by using historical and public information.