Seasonalities in China's Stock Markets: Cultural or Structural?

Abstract

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.In this paper, we examine returns in the Chinese A and B stock markets for evidence of calendar anomalies. We find that both cultural and structural (segmentation) factors play an important role in influencing the pricing of both A-and B-shares in China. There is some evidence of a February turn-of-the-year effect, partly owing to the timing of the Chinese Lunar New Year (CNY); and the holiday effect around the CNY period is stronger and more persistent compared with the other public holidays. The segmentation between the two markets is apparent in the day-of-the-week effect, where B stock markets tend to post significant negative returns on Tuesdays, corresponding with overnight developments in the United States, while significant negative returns are observed on Mondays in the A stock markets. Investment strategies based on some of these calendar anomalies, and allowing for transaction costs, suggest that the A stock markets tend to offer more economically significant returns. JEL Classification Numbers: G11, G12, G14, G15

Comparison of the ‘turn-of-the-month’ and lunar new year return effects in three Chinese markets: Hong Kong, Shanghai and Shenzhen

“…As seen through the prism of the Hong Kong, Shanghai and Shenzhen stock markets, this points to the absence of the muchpublicized US January effect. In relation to the mainland markets, the results resonate with earlier findings which offer only limited evidence for a January month-of-the-year effect (see Mookerjee and Yu, 1999;Mitchell and Ong, 2006;Zhang et al, 2008).…”

Modeling the distribution of extreme returns in the Chinese stock market

“…This observation is consistent with the fact that the Asian financial crisis did not have a substantial impact on the Chinese economy, as claimed by Mitchell and Ong (2006). M a n u s c r i p t 7 Figure 3 displays the QQ plot of the daily log return against the normal distributions.…”

“…The restricted number of shares available for domestic investors implies a possible artificially strong demand in the Chinese stock market. This is further fuelled by the strong increase in economic wealth (GDP) together with limited alternative investments opportunities and the high savings rate of the Chinese population (Mitchell and Ong, 2006). These empirical findings provide a new understanding of the best distribution to describe extreme behavior for the Chinese stock market.…”

Investors' reactions to sharp price changes: Evidence from equity markets of the People's Republic of China

“…5 "A" shares are a class of common or preferred stocks issued by Chinese companies in China and are listed on the Shanghai or Shenzhen stock exchanges. These shares are denominated in Chinese currency and 4 For a more detailed information on the uniqueness of Chinese equity markets, please refer to Chen, Kwok, and Rui (2001), Chen, Bong-soo and Rui (2001), and Mitchell and Lee (2006). 5 In addition to "A" and "B" shares, China issued as of 1993 "H" shares, "N" shares, "L" shares, "S" shares, and "Red chips".…”