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Deregulation and liberalization of the Chinese stock market and the improvement of market efficiency

Jui-Cheng Hung

The Quarterly Review of Economics and Finance, 2009, vol. 49, issue 3, 843-857

Abstract: This study employs single and multiple variance ratio tests to reexamine the weak-form efficient market hypothesis (EMH) of A- and B-shares on the Shanghai and Shenzhen exchanges in Chinese stock market. The study also examines the influence of the release of investment restriction of B-share markets on market efficiency. For the whole sample period, the weak-form EMH is only supported for Shanghai A-shares, and is not supported for the remaining shares. For the sub-sample period, the Shenzhen A-share and B-shares of both exchanges being rejected for the weak-form EMH in the earlier sample period are supported following the regulatory change. Rolling multiple variance ratio test statistic values provide additional evidence of weak-form EMH. The improvement of market efficiency can be explained by the increased liquidity and maturity accompanying deregulation and liberalization.

Keywords: Variance; ratio; test; Efficient; market; hypothesis; Chinese; stock; markets; Deregulation (search for similar items in EconPapers)
Date: 2009
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