The Research On The Holiday Effect And The Heterogeneity Of China’s Stock Market

The efficient market hypothesis is an important theory in economic field. However, inrecent years, However, more and more market anomaly has been proven, just likemomentum effect, which challenge the efficient market hypothesis. Holiday effect, as oneof the market vision, in recent years，the public and scholars have paid more and moreattention to it. With the holiday effect continues to be confirmed, the validity of the marketis questioned, at the same time, also shows some investors are still able to obtain excessreturns above market revenue in some way, Therefore, weather the effect of holidays instock market exist or not has important theoretical significance.In recent years, the holidays in our country have experienced a great transformation,On New Year’s Day2008, traditional holidays, such as the Tomb Sweeping Festival,Dragon Boat Festival and Mid-Autumn Festival have been also classified as Statutoryholidays. Currently, most of the studies about holiday effects focus on the Golden Weekswhich before the adjustment.The paper mainly study if there are still holiday effects, aswell as of all industries which one has obvious holiday effects. On this basis, Therefore,the research of the existence of the effect of holidays in stock market can not only helpdevelop provide reference to improve the market mechanism, it also can guide theinvestors to make better investment decisions.This paper analyzes the relationship between the efficient market hypothesis andvarious market visions, with the traditional financial theory, the marketanomalies,including holidays, were analyzed. We select Shanghai sub-index, namely theShanghai Industrial Index (000004), the Shanghai Commercial Index (000005), theShanghai real estate index (000006), the Shanghai Public Utilities Index (000007) and theShanghai Composite Index (000008), low and high frequency trading data of all theseindexes are used to study the holiday effects. There are two main models used in the paper,an event study is based, another dummy variable regression model as a validation model,which provides further verification of the event study conclusions. The empirical resultsshow that the festival is a strong presence, the five industries in the Shanghai CommercialIndex and the Shanghai Public Utilities Index have obvious holiday effects. At last，Combining empirical results, investment strategy for investors have been proposed. Also point some issues which need more improvements and further research both in theory andempirical aspects.