The Research Of The Efficiency In Shanghai Securities Market Based On Fractal Theory

Since 1970 Eugene F.Fama put forward the efficient market theory, the formation of efficient markets hypothesis has laid a solid foundation for the development of modern financial theory. Markowitz’s mean- variance theory and portfolio theory,William Sharpe’s The capital asset pricing model(CAPM), Stephen Ross’ s arbitrage pricing theory(APT), Black-Scholes’ s option pricing model and the like, which take efficient markets hypothesis as theoretical premise, promote the development of modern financial theory.However, with emergence of the endless financial anomalies and development of research, the efficient market hypothesis is faced with increasingly challenges. In1994, Peters applied the fractal theory to capital market, which stands for the official birth of fractal market hypothesis market hypothesis market hypothesis and creates a fractal theory pioneer in the financial markets. The theory that the market is a very complex fractal systems where time series of asset prices yield does not obey normal distribution, and furthermore with the features of long-term memory effect,non-cyclical and persistence, this non-linear theory in the capital markets more truly reflect the functioning of capital markets.This paper firstly introduces the efficient market theory and fractal market theory,and then compares the efficient market theory domestic and international scholars’ empirical analysis in financial markets based on the efficient market theory the and the fractal market theory. In the second chapter, first of all, the thesis reviews the efficient market theory; secondly, it transits to the analysis of the relationship between the transmission of monetary policy and market efficiency; thirdly, it makes a brief overview of the efficient market hypothesis and analysis the existence of defects and blind spots in theory. Finally, it introduces the fractal market hypothesis, and describes the development of the fractal market theory and the relevant concepts of fractal market theory, and describes the applicability of fractal theory to the test of market effectiveness. The third chapter treats the three largest markets on trading volume andturnover in the Shanghai Securities Market--Shanghai Bond Market, the Shanghai Fund Market, the Shanghai Stock Market as a microcosm of Chinese Securities market to multi-fractal model by daily, weekly and monthly time series of yield and volume growth rate of SSE T-Bond Index, SSE Fund Index and the SSE Composite Index. Brownian motion means Hurst exponent is 0.5 which is assumed as the symbol of perfectly efficient market. On the one hand, we can compute directly Hurst exponent by R / S analysis and compare laterally the Hurst exponent of Shanghai Bond Market, Shanghai Fund Market, Shanghai stock Market to analysis the market efficiency; on the other hand, we can obtain indirectly Hurst exponent by the relationship between the fractal dimension d and Hurst exponent in Hurst exponent Autoregressive fractional integrated moving average model(ARFIMA(p,d,q) model),and compare longitudinally the Hurst exponent of Shanghai Bond Market, the Shanghai Fund Market, Shanghai Stock Market to analysis the market efficiency in benchmark interest rate adjustment cycle. And then the performance of Shanghai security market is cited. In conclusions, Shanghai Securities market is a fractal inefficient market. The fourth chapter analyzes the reasons and policy suggestions of Shanghai securities market. I summarize the arguments and prospect the future development in research in chapter five of this paper.The innovation of this paper are as follows:(1) On the basis of the majority of scholars using time series of yield variables as the fractal sample, I add volume growth rate as variable to construct multi-fractal model in view of price and quantity;(2) Fractal theory is applied to test the efficiency of security market. Specifically,according to the random walk theory and the market equilibrium theory, it is assumed that the security market is perfectly efficient market stock in Brownian motion when Hurst exponent equals 0.5.and I make an empirical analysis of the market efficiency in Shanghai Bond Market, the Shanghai Fund Market, the Shanghai Stock Market at the same time by daily, weekly and monthly time series of yield and volume growth rate of SSE T-Bond Index, SSE Fund Index and the SSE Composite Index;(3) I divide time window by benchmark interest rate adjustment cycle of The People’s Bank of China to examine the Shanghai Securities Market’s respond to benchmark interest rate adjustment, and the efficiency of the Shanghai Securities Market,and totest the impact of monetary policy on the Shanghai Securities Market.