Are Chinese stock markets efficient? Further evidence from a battery of nonlinearity tests

Lim , Kian Ping and Brooks, Robert D. (2009) Are Chinese stock markets efficient? Further evidence from a battery of nonlinearity tests. Applied Financial Economics Volume 20, Issue 3, February 2010, Pages 255-264 , 19 (2). pp. 147-155. ISSN 0960-3107

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Official URL: http://dx.doi.org/10.1080/09603100701765182

Abstract

Given that the efficiency of the Chinese stock markets was empirically examined in extant literature using statistical tests that are designed to uncover linear correlations of price changes, the obtained statistical inferences of efficiency/inefficiency are on very shaky grounds as highlighted in a recent article by Saadi et al. (2006). Motivated by this concern, the present article re-examines the efficiency of the A- and B-shares markets in Shanghai and Shenzhen Stock Exchanges (SHSE and SZSE) using a battery of nonlinearity tests. The empirical investigation reveals strong evidence of nonlinear serial dependence in the underlying returns generating processes for all indices even after removing linear serial correlations from the data, hence, contradicting the unpredictable criterion of weak-form efficient market hypothesis. Theoretically, these results are not surprising given the fact that investors in the Chinese stock markets trade like noise traders, who purely speculate and treat the market like a casino.

Item Type:Article
Uncontrolled Keywords:Capital market, Correlation, Exchange rate, Financial market, Financial system, Nonlinearity, Stock market
Subjects:?? HG4551-4598 ??
Divisions:SCHOOL > Labuan School of International Business and Finance
ID Code:1526
Deposited By:IR Admin
Deposited On:23 Mar 2011 10:25
Last Modified:24 Feb 2015 10:39

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