Is the Chinese stock market really inefficient?

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)122-137
Journal / PublicationChina Economic Review
Volume23
Issue number1
Publication statusPublished - Mar 2012

Abstract

Groenewold et al. (2004) 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 findings 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. © 2011 Elsevier Inc.

Research Area(s)

  • Bootstrapping, Efficient market hypothesis, SETAR model, SOE reform

Citation Format(s)

Is the Chinese stock market really inefficient? / Chong, Terence Tai-Leung; Lam, Tau-Hing; Yan, Isabel Kit-Ming.

In: China Economic Review, Vol. 23, No. 1, 03.2012, p. 122-137.

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