Geographical Locations and Market Efficiency of Listed Companies—Analysis Based on the Chinese Market

Ying Ren (), Bowen Pan (), Chunyi Wang (), Ruoyu Yan () and Mingyin Zhang ()
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Ying Ren: Beijing Jiaotong University
Bowen Pan: Central University of Finance and Economics
Chunyi Wang: The Experimental High School Attached to Beijing Normal University
Ruoyu Yan: The Experimental High School Attached to Beijing Normal University
Mingyin Zhang: Beijing Jiaotong University

A chapter in IEIS 2020, 2021, pp 141-153 from Springer

Abstract: Abstract Several researches on behavioral finance indicate that the geographical locations of listed companies can affect investors’ behaviors, return on investment or stock prices. Based on what has been achieved, this article studies whether the geographical locations of listed companies affect the weak-form market efficiency defined by Fama (J Finan 25(2):383-417, 1970 [1]). This article selects geographical and historical data of more than 1000 stocks traded on the Shanghai and Shenzhen stock exchanges between 2009 and 2018 and analyzes this issue by defining three financial centers and eight central cities and using the ADF test and variance ratio test. The test results show that the closer a listed company is to a financial center (or a central city), the more likely that its share price performance tends to conform to the weak-form efficient market hypothesis. On the contrary, the farther away a listed company is from a financial center (or a central city), the more likely that its share price performance tends to deviate from the weak-form efficient market hypothesis.

Keywords: Geographical location; Efficiency market hypothesis; ADF test; Variance ratio test (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-33-4363-4_11

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DOI: 10.1007/978-981-33-4363-4_11

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