Study On Capital Market Regulation Based On China’s Capital Market Efficiency

Capital market plays an important role in a country’s economy. However, it can not play thefunction of resource allocation normally because of the market failure and inefficient, whichaffects the development of the whole macroeconomic seriously and even leads to financialcrisis. Regulation of the capital market is an effective way to avoid market failure and toimprove the efficiency of capital markets. But, durning the process of the theory and practiceabout the capital market regulation in all countries, it is found that if the way of regulation is notappropriate for the capital market,it would not only hinder the efficiency of capital market,butalso lead to the market confusion.The operation of China’s capital market is still notstandardized although it has developed20years.It is a valuable subject to research whether thegovernment regulation is effective to improve the capital market efficiency and how to optimizeit in order to promote the development of the capital markets better.In this paper, the research methods includes the combining of normative research&positive analysis,and the combining of deductive method and inductive method.firstly, we startfrom the theoretical development of the capital market regulators and capital market efficiency,and overview the research results of abroad scholars systematically. The theory of regulation canbe into two categories: demand theory and effect theory; the efficiency of the capital market isdivided into information efficiency, allocated efficiency and operational efficiency. Especially,we explain the core theory of the information theory: the Efficient Market Hypothesis. Secondly,we analysis the relationship between regulation and efficiency of capital markets, on the onehand, we state the theoretical necessity, positive effects and negative effects on marketefficiency analysis of the regulatory impact; on the other hand, we have a empirical analysis,use random walk model, Shanghai Composite Index as the sample, test the impact of capitalmarket regulatory on the efficiency of market information, and draw a conclusion that theregulatory of capital market is helpful for improving the efficiency capital market. Finally,wehave a suggestion about optimizing the regulatory of our capital market based on the efficiencyof capital markets.