Weak-form Efficiency and Causality Tests in Chinese Stock Markets

Martin Laurence, Francis Cai and Sun Qian
Additional contact information
Martin Laurence: William Paterson University of New Jersey, U.S.A.
Francis Cai: William Paterson University of New Jersey, U.S.A.
Sun Qian: Nanyang Technological University, Singapore

Multinational Finance Journal, 1997, vol. 1, issue 4, 291-307

Abstract: China has two major stock exchanges, the Shanghai and the Shenzen exchanges. Each of these exchanges trades two types of shares, type “A” and type “B” shares. Type “A” shares are available to domestic investors only and type “B” shares are available to foreign investors. This article tests for the weak-form efficiency in these markets and explores the statistical relationships and causality among these Chinese stock markets with each other and with the U.S. and Hong Kong stock markets. The results indicate the existence of (1) a weak-form efficiency in the market for “A” shares but not “B” shares, (2) statistically weak linkages between the Chinese markets, (3) a weak causal effect from the Hong Kong to the four Chinese markets, and (4) a strong causal effect from U.S. stock mark to all four Chinese stock markets and the Hong Kong Stock market, particularly during the second period of the sample. These results support the assertion that the Chinese stock markets are becoming more integrated to the global economy.

Keywords: Chinese stock markets; Granger causality tests; Hong Kong stock market; market efficiency (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (30)

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