Has Stock Market Efficiency Improved? Evidence from China

Abstract

Stock market has been associated with economic growth through its role as a source of new private capital. On the other hand, economic growth may be the catalyst for stock market growth. The purpose of this paper is to investigate the efficiency of the two official stock markets in China. The sample includes the daily closing prices of A-share and B-share indexes in both the Shanghai and Shenzhen stock exchanges for the period of January 1st, 2006 to December 31st, 2010. Three different approaches are employed; namely, serial correlation test, runs test and variance ratio test. Statistical evidence from serial correlation test shows that returns are correlated in both Shanghai and Shenzhen indexes and therefore the markets are weak-form efficiency. JEL Classification: G15

Testing random walk hypothesis for Istanbul stock exchange

“…One crucial intuition behind the conflicting findings may result from using different econometric techniques and structural breaks/time-varying nature of data sets.Even most of the quantitative studies have been conducted for mature developed markets so far because of the robust firm and country specific data for variables; emerging and frontier countries have recently got paid interest of researchers. Urrutia (1995) for Argentina (+); Ely (2011) for Brazil (-); Lim et al (2013) for China (+); Kumar and Kumar (2015) for India (-); Jefferis and Graham (2005) for South Africa (+) and Niemczak and Smith (2013) for Middle East Stock Markets (-) can be named by countries particularly. Nonetheless, inconsistency of EMH conformity is valid for emerging markets as well which shown by +/-signs in brackets for countries.…”

Deferred revenue changes as a leading indicator for future financial performance

“…In addition, prior research suggests that China's market participants are not sophisticated (e.g. Lim et al, 2013). Thus, it is reasonable to expect that they may not be able to fully incorporate the information content of deferred revenue changes in their pricing decisions.…”

Weak-form Efficiency After Global Financial Crisis: Emerging Stock Market Evidence

“…Their results show, among others, that the African continent-wide stock price indices have significantly better weak-form informational efficiency than their national counterparts. In China, Lim et al (2013) investigate the efficiency of the daily closing prices of A-share and B-share indexes in both the Shanghai and Shenzhen stock exchanges using three different techniques namely serial correlation test, runs test and variance ratio test. Though they find mixed results, they still conclude that China’s stock market is still weak-form efficient.…”

“…On the other hand, majority of the recent studies of WFE from emerging markets show evidence of weak-form inefficiency (see, for example, Afego, 2012; Alkhatib & Harasheh, 2014; Arora, 2013; Harrison & Moore, 2012; Ogege & Mojekwu, 2013; Owido, Onyuma, & Owuor, 2013). A few studies, however, provide evidence of WFE (see, Ajao & Osayuwu, 2012; Kulikova & Taylor, 2014; Lim, Huang, Yun, & Zhao, 2013).…”