Economics at your fingertips  

Public information content and market information efficiency: A comparison between China and the U.S

Bin Liu, XiangYang Xia and Wen Xiao

China Economic Review, 2020, vol. 60, issue C

Abstract: Based on the concept that the presence of public information shocks can increase the synchronicity of stock returns, we develop an extended version of the mixture of distribution hypothesis model (MDH) along the lines of Andersen (1996) to measure the public information content embedded in the stock prices. The results show that although we add an additional information structure, the significance of the MDH is still higher than that of Andersen's (1996) model, which indicates that our setting is reasonable. We measure and compare the market effectiveness between China and the United States from 1998 to 2016 by using the public information content calculated by the developed MDH model. The calculation results show that the average public information in the Chinese market is 0.336, which means the market efficiency is slightly lower than 0.317 in the United States.11Based on the theoretical context of this article, the public information content is negatively related to market efficiency, so “0.336 is lower than 0.317”. This setting also applies to Fig. 1 and 2, where a large number represents low market efficiency and vice versa. Further analysis shows that market efficiency has increased steadily between 2002 and 2014 and has smaller volatility in the Chinese market. The slow increasing in market efficiency indicate that the securities laws enacted by China in the 1990s and 2000s aimed at promoting the development of the stock market are effective.

Keywords: PMDH; CU-GMM; Market efficiency; Return synchronicity (search for similar items in EconPapers)
JEL-codes: C51 C52 G12 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.chieco.2020.101405

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 Haili He ().

Page updated 2020-12-25
Handle: RePEc:eee:chieco:v:60:y:2020:i:c:s1043951x2030002x