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The Chinese stock exchange market: operations and efficiency

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  • H. R. Seddighi
  • W. Nian
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    Abstract

    The Chinese stock market has developed rapidly since early 1990s, when the two stock exchanges, the Shanghai Securities Exchange and the Shenzhen Securities Exchange, were established. Until 2000, the number of listed domestic companies has reached over 1000, and market capitalization relative to GDP reached about 33.4%. As China joins WTO, the Chinese stock market will become a great concern of the global investors, and will play a more important role in the world economy. The purpose of this paper is to provide an up-to-data account of the Chinese stock exchange market and to test its efficiency. The daily data of the Shanghai Stock Exchange index and eight shares listed in the Shanghai Stock Exchanges are examined, for this purpose. The testing procedure involves three processes: (1) use the Durbin-Watson test, Durbin 'h' test, the Lagrange Multiplier test for autocorrelation to examine the assumption of the model that the successive occurrences are independent; (2) use the Dickey-Fuller tests for unit root to test the assumption that the occurrences are identically distributed; (3) use ARCH test to examine whether the residuals contain some hidden, possibly non-linear structure, and fit a GARCH-M(1,1) model to the first difference if the ARCH effect is found to be present in the share prices.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 14 (2004)
    Issue (Month): 11 ()
    Pages: 785-797

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    Handle: RePEc:taf:apfiec:v:14:y:2004:i:11:p:785-797

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    Cited by:
    1. C. James Hueng, 2006. "Short-sales constraints and stock return asymmetry: evidence from the Chinese stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 16(10), pages 707-716.
    2. Fifield, Suzanne G.M. & Jetty, Juliana, 2008. "Further evidence on the efficiency of the Chinese stock markets: A note," Research in International Business and Finance, Elsevier, vol. 22(3), pages 351-361, September.
    3. Hoque, Hafiz A.A.B. & Kim, Jae H. & Pyun, Chong Soo, 2007. "A comparison of variance ratio tests of random walk: A case of Asian emerging stock markets," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 488-502.
    4. repec:ebl:ecbull:v:7:y:2007:i:9:p:1-12 is not listed on IDEAS
    5. Charles, Amélie & Darné, Olivier, 2009. "The random walk hypothesis for Chinese stock markets: Evidence from variance ratio tests," Economic Systems, Elsevier, vol. 33(2), pages 117-126, June.
    6. Long, Wen & Mok, Henry M.K. & Hu, Yan & Wang, Huiwen, 2009. "The style and innate structure of the stock markets in China," Pacific-Basin Finance Journal, Elsevier, vol. 17(2), pages 224-242, April.
    7. Bodeutsch, D. & Franses, Ph.H.B.F., 2014. "The Stock Exchange of Suriname: Returns, Volatility, Correlations and Weak-form Efficiency," Econometric Institute Research Papers EI 2014-02, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    8. Gourishankar S Hiremath & Bandi Kamaiah, 2010. "Nonlinear Dependence in Stock Returns: Evidences from India," Journal of Quantitative Economics, The Indian Econometric Society, vol. 8(1), pages 69-85, January.
    9. Hung, Jui-Cheng, 2009. "Deregulation and liberalization of the Chinese stock market and the improvement of market efficiency," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 843-857, August.

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