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Is the Chinese Stock Market Really Efficient

Isabel K. Yan, Terence Tai Leung Chong and Tau-Hing Lam

MPRA Paper from University Library of Munich, Germany

Abstract: Groenewold et al (2004a) documented that the Chinese stock market is inefficient. In this paper, we revisit the efficiency problem of the Chinese stock market using time-series model based trading rules. Our paper distinguishes itself from previous studies in several aspects. First, while previous studies concentrate on the viability of linear forecasting techniques, we evaluate the profitability of the forecasts of the self-exciting threshold autoregressive model (SETAR), and compare it with the conventional linear AR and MA trading rules. Second, the finding of market inefficiency in earlier studies mainly rest on the statistical significance of the autocorrelation or regression coefficients. In contrast, this paper directly examines the profitability of various trading rules. Third, our sample covers an extensive period of 1991-2010. Sub-sample analysis shows that positive returns mainly concentrate in the pre-SOE reform period, suggesting that China’s stock market has become more efficient after the reform.

Keywords: Efficient Market Hypothesis; SETAR Model; Bootstrapping; SOE reform (search for similar items in EconPapers)
JEL-codes: C22 G10 G12 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-fmk, nep-for and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Is the Chinese stock market really inefficient? (2012) Downloads
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