Intraday information efficiency on the Chinese equity market
Tao Chen (),
Jun Cai and
Richard Y.K. Ho
China Economic Review, 2009, vol. 20, issue 3, 527-541
Bid-ask spread is a direct measure of information asymmetry. As such, it can be used to evaluate information efficiency. In this paper, we show that both the quoted and effective spreads on the Shanghai Stock Exchange are extremely high at the open, decrease over the trading day, and experience a small rebound at the close. The spread decreases with share volume, daily trades, and market capitalization, but increases with average trade size. We further examine the beta using the unbiasedness regression from Biais et al. [Biais, B., Hillion, P., Spatt, C. (1999). Price discovery and learning during the pre-opening period in the Paris Bourse. Journal of Political Economy, 107, 1218-1248] and find that intraday prices are efficient and unbiased for more liquid stocks. This suggests that liquidity prompts information-motivated trading, which, in turn, improves information dissemination. Moreover, our findings indicate that small and medium trades are more likely to facilitate the formation of efficient prices at the open and close of the market, while large trades play a more important role during the other trading periods.
Keywords: Information; efficiency; Spread; Liquidity; Chinese; market (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:20:y:2009:i:3:p:527-541
Access Statistics for this article
China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu
More articles in China Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().