The efficiency of the Chinese stock market and the role of the banks

Financial crisis and stock market efficiency: Empirical evidence from Asian countries

“…Hence, these authors concluded that an efficient market is brought about by providing a regulatory framework that encourages participation in the market, removes institutional restrictions on trading, and ensures investors have access to high quality and reliable information. Groenewold, Tang, and Wu (2003), Groenewold, Wu, Tang, and Fan (2004) postulated that changes in the regulations governing the direct involvement of banks in the stock market would have significant effects on market efficiency given the fact that Chinese banks traditionally played a dominant role in their country's financial system. To address this question empirically, the authors examined market efficiency over three different sub-periods in which banks were subjected to different regulations.…”

The random walk hypothesis for Chinese stock markets: Evidence from variance ratio tests

“…, Laurence, Cai and Qian (1997) and applied serial correlation tests while Liu, Song and Romilly (1997), Groenewold, Tang and Wu (2003) and Seddighi and Nian (2004) employed unit root tests. However, Lo and MacKinlay (1989) showed that unit root and serial correlation tests are less powerful than variance-ratio [VR] test, especially in the presence of heteroscedasticy.…”

“…As shown by Groenewold et al (2003), the banks have a traditional importance in the Chinese financial system, and thus the important changes in the relationship between the banks and the stock market in 1996 and 2000 could have significant effects on the efficiency of the Chinese stock markets. More precisely, until 1996 banks had a dominant influence on the stock market.…”

Are Chinese stock markets efficient? Further evidence from a battery of nonlinearity tests

“…1 Generally, testing for the efficiency of the Chinese stock markets revolves around examining whether stock prices follow a random walk process (see, e.g. Laurence et al, 1997;Liu et al, 1997;Long et al, 1999;Mookerjee and Yu, 1999;Darrat and Zhong, 2000;Lee et al, 2001;Groenewold et al, 2003Groenewold et al, , 2004Lima and Tabak, 2004;Ma, 2004;Seddighi and Nian, 2004). Taken as a whole, no consensus can be reached on the efficiency of these Chinese stock markets.…”

“…Laurence et al (1997) and Mookerjee and Yu (1999) drew their conclusions based solely on the results of serial correlation and runs tests. Liu et al (1997) only employed unit-root tests to examine the random walk hypothesis, while the analysis in Groenewold et al (2003Groenewold et al ( , 2004 and Seddighi and Nian (2004) were conducted using autocorrelation and unit-root tests. However, the Monte Carlo experiments performed by Lo and Mackinlay (1989) demonstrate that the above tests are less powerful compared to the variance ratio test in detecting serial correlations of stock returns.…”