Weak Form Efficiency Research And Risk Control Of Chinese Stock Market During The COVID-19

With the continuous advancement of China’s market-oriented economy,the role of the stock market in the financial market is becoming increasingly prominent.At the end of December 2019,the first case of COVID-19 was found in Wuhan,Hubei Province,and then the epidemic spread and broke out in other provinces and cities in China.The impact of COVID-19 has led to the disruption of the capital market order,the abnormal turbulence of the financial market,and the decline of more than 3000 shares of listed companies,which has brought many market instability and uncertainty.The stock index fluctuates violently,but whether this fluctuation is reasonable and whether investors can use past historical information to obtain excess returns depends on the effectiveness of the Chinese stock market,that is,whether it reaches weak form efficiency.This is crucial for investors to predict stock price fluctuations reasonably through market information and to avoid risks.This article organizes and analyzes existing domestic and international research materials,and based on the existing research foundation,under the guidance of theories such as random walk theory and efficient market hypothesis(EMH),selects the Shanghai and Shenzhen 300 Index as the test object to empirically test the weak form effectiveness of the Chinese stock market.Firstly,use data statistical analysis,sequence correlation testing,and unit root testing to preliminarily determine the statistical characteristics and stability of the return rate sequence;Secondly,run test is used to analyze whether the effectiveness of the CSI 300 index changes before and after the COVID-19,whether it conforms to random walk,and whether the stock price fully reflects historical information.Finally,based on the official trading of the Shanghai and Shenzhen 300 stock index options on December 23,2019,the Black Scholes option pricing formula was used to calculate the implied volatility of the options,and an investment strategy was constructed using this as an indicator.The return rate was tested back to achieve risk control,enabling investors to avoid market risks caused by unexpected events in markets with low effectiveness.The results show that:(1)Before and after the impact of the COVID-19,China’s stock market has reached a weak form of efficiency,but the degree of effectiveness is weak.(2)At the beginning of the outbreak of COVID-19,the market fell into panic,and investors would make irrational decisions.At this time,the investment strategy based on the implied volatility of options was effective,which could obtain excess returns and avoid the risk of price fluctuations in the stock market;But as the epidemic gradually came under control and the stock market began to warm up,the investment strategy was too conservative and ineffective,and the excess returns already obtained were depleted.Finally,policy recommendations are proposed from aspects such as improving information disclosure,curbing excessive speculation,strengthening investor guidance,and developing the derivatives market.