Intraday information efficiency on the Chinese equity market

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

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Detail(s)

Original languageEnglish
Pages (from-to)527-541
Journal / PublicationChina Economic Review
Volume20
Issue number3
Publication statusPublished - Sep 2009

Abstract

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. © 2009 Elsevier Inc. All rights reserved.

Research Area(s)

  • Chinese market, Information efficiency, Liquidity, Spread

Citation Format(s)

Intraday information efficiency on the Chinese equity market. / Chen, Tao; Cai, Jun; Ho, Richard Y.K.

In: China Economic Review, Vol. 20, No. 3, 09.2009, p. 527-541.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal