The Theory Of Financial Market Efficiency And Empirical Analysis On The China’s Stock Market

Finance is the core of modern economy. The mature financial market is the premise of the all-round development of China. Efficient financial market is a necessary condition for sustained and healthy development of the Chinese. The stock market is the biggest influence degree market of financial market development, it can well reflect the development of the financial market. Efficient market theory is the pillar of financial economics theory, it is the core of the quantity theory of the capital market, it is an important part of the study of markets and securities. On the one hand, through the research on the theory of market efficiency, we can have a better understanding of the financial market and the knowledge of capital market theory; On the other hand, the empirical test the effectiveness of China stock market, we can understand the development level of Chinese stock market. Theoretical research and empirical analysis have important significance on the development of China’s stock market.At first, this paper introduces the basic knowledge of financial market and the financial market of our country’s development situation, reveals the background and practical significance, and we summed up the achievement about effectiveness of market research.Second, we explore the development process of the theory of effective market, understand the prerequisite of the efficient market theory and three different types of effective market form. At the same time, we also pointed out the challenges of the theory of effective market.Third, we combine the relevant theory knowledge of mathematics, statistics and financial inspection methods, summarize the test method of weak form market, semi-strong market and strong form market. It includes the test of weak form market such as correlation test, run test, CJ statistic test, variance ratio test, and semi-strong form market test such as event study method etc.;Fourth, combined with the actual stock market in our country, we divided into three stages of the January 2,1991 to December 31,2014. We gives an empirical test of the shanghai Composite Index, Shenzhen Component Index in different stages of the daily return series by different testing methods, and specific analysis of the corresponding test results. We found through the empirical test:Before 1993, the Shanghai and Shenzhen stock market are not efficient stock market. From 1993 to 1996, Shanghai and Shenzhen stock market is the development stage of weak form market. From 1997 to 2014, Two stock market reached the weak form state. Finally, we come to the conclusion that China’s stock market is weak form efficient market.Finally, according to the empirical test results and the conclusions, we analyzed the specific reasons, It mainly includes the allocation of resources with low level of the market, the information disclosure mechanism is not perfect, investors irrational structure and other reasons. According to these reasons, we put forward the policy proposal which enhanced the effectiveness of the market, These policy proposal Including the perfect of capital market system and information disclosure system, standardize the market behavior, and reduce government intervention, to expand the capital market development degree, encourage financial innovation and so on.