StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Testing Weak-Form Efficiency of Chinese Stock Market - Literature review Example

Cite this document
Summary
LITERATURE REVIEW The Literature in General The present corpus of literature on market efficiency is quite extensive. This is probably because stock markets are essential components of modern economic systems. Hence, one can find many studies that provide general background and specific themes addressing relevant issues today…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER96.5% of users find it useful
Testing Weak-Form Efficiency of Chinese Stock Market
Read Text Preview

Extract of sample "Testing Weak-Form Efficiency of Chinese Stock Market"

Download file to see previous pages

A specific concern of this review involves the weak-form of market efficiency. Ho and Lee (2004) provided deep insights in this aspect, outlining background information as well as an outline of empirical evidences that defined, explained and determined weak-form efficiencies in stock market such as those in the United States. Chandra (2008, pp.423) also explained relevant hypotheses such as how current price of a stock reflects all information found in the record of past prices and volumes, which is translated to the argument that past and future price movements are not related.

A very important aspect in the existing literature on stock market efficiency is the testing process and methodology. This makes sense because in order to determine the performance and output of a specific stock market, it must be assessed or tested for efficiency. In this regard, numerous studies were undertaken. For instance, the works of Campbell, Lo and MacKinlay (1997) as well as Barber and Lyon (1997) and Loughran and Ritter (2000) demonstrated and examined the conventional strategies for testing performance under normal economic conditions.

The information provided by Preston and Collins (1966) is quite helpful for this study. The researchers outlined the criteria by which stock market efficiency could be appraised. . A review of the corpus of literature demonstrate high amount of work done on weak market efficiency. One of the earliest to have investigated this theme is Fama (1965), who found a serial correlation from among the top stocks listed in the American stock market by evaluating time-dependence that occur in the current and past returns.

Further studies have argued in favor of adding additional variables such as when Campbell and Shiller (1988) and Harvey (1995) found the need to include financial and macroeconomic variables in the outcome and distribution of return rate. Review of empirical evidence on weak-form efficiency from developed Market The general consensus, at least from the perspective of most researchers such as Fama (1970), Bhatti, Campbell et al., Al-Shanfari and Hossain (2006), Lim (2008), is that market efficiency is not realistic.

Groh (2009, pp.5) explained that as a result of such condition, there must exist adequate opportunities for profit, which are the same as inefficiencies, compensating investors in the process for the cost incurred in the trading and other market activities. Abramowicz, Maciaszek and Wecel (2011, pp.113) echoed this, as they reported that although possible – though only demonstrated in its higher probability in developed markets – market efficiency is not realistic. These claims were validated by the work of Moyer et al.

(2012, pp.48) who reported in their investigation that the US markets are efficient in the weak-form context. Another study that supports this position is that one undertaken by Dow and Gorton (1997). In this study, it was found that economic efficiency has insignificant an impact on stock market efficiency. What this means is that wealthy

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Testing Weak-Form Efficiency of Chinese Stock Market Literature review”, n.d.)
Testing Weak-Form Efficiency of Chinese Stock Market Literature review. Retrieved from https://studentshare.org/finance-accounting/1455838-literature-review-on-weak-form-market-efficiency
(Testing Weak-Form Efficiency of Chinese Stock Market Literature Review)
Testing Weak-Form Efficiency of Chinese Stock Market Literature Review. https://studentshare.org/finance-accounting/1455838-literature-review-on-weak-form-market-efficiency.
“Testing Weak-Form Efficiency of Chinese Stock Market Literature Review”, n.d. https://studentshare.org/finance-accounting/1455838-literature-review-on-weak-form-market-efficiency.
  • Cited: 0 times

CHECK THESE SAMPLES OF Testing Weak-Form Efficiency of Chinese Stock Market

Calendar Effects on Security Price Anomalies

Literature Review For the day of the week effect in stock market returns, Gibbons & Hess (1981), Fama (1991), (Grossman and Stiglitz 1980)), French (1980)), Lakonishok and Levi (1982)), Rogalski (1984)) and Keim and Stambaugh (1984)), Harris (2002), Lakonishok and Smidt (1988), Allen and Karjalainen (1993) have exhibited the impression of this phenomenon.... January Effect, the Day of the Week Effect, the Holiday Effect Introduction Calendar effects on security price anomalies have been a hot issue of interest among academicians, economists, statisticians and market experts for many decades....
9 Pages (2250 words) Literature review

Does the Efficient Market Theory Apply on the Forex Market

The Forex market is operating on an international basis where currency of each nation is bought and sold freely.... The forex system was introduced in the 1970s at the time of introduction of free exchange rates and the price of one currency, and the price of one currency against another that happens from demand and supply that are only decided by the market participants.... Forex market can be termed as a perfect market as it cannot be either monopolised or controlled by any of its participants....
17 Pages (4250 words) Literature review

Evaluation of the Capital Asset Pricing Model (CAPM) Using Chinese Stock Market Data

has been applied in the chinese stock market case study.... To test the CAPM principles in this stock market, the study will employ the use of approach methods contributed for by Black, Jensen, and Scholes as per the year 1972; described as the time series test.... The monthly stock returns of some of the firms listed in the chinese stock Exchange are used in the analysis.... From the analysis of the chinese stock exchange data for the period of four year in line with the above methods, it is apparent that this duty did not hold up fully with the CAPM principles....
42 Pages (10500 words) Dissertation

Market Competitiveness for SOEs in China

One such assiduous yet formidable step towards reassuring the world community about the intentions of chinese government is the Reforming of the ‘State Owned Enterprises' (SOE).... In order to maintain a balance in global trade, business people from the rest of the world… seized the opportunity to participate in the Chinese market, with its huge consumer base of 1.... billion consumers and its dynamic export market of manufactured goods to nearly all countries of the world....
45 Pages (11250 words) Essay

THE IMPACT OF INSTITUTIONAL OWNERSHIP ON CASH DIVIDENDS:

They are rapidly replacing individual investors in the capital market.... With the issuance of a new stock or security, corporate matters will be examined by an appropriate intermediary.... Unlike individual investors, institutional investors invest large amounts of their company resources into various stocks and shares; thereby… Also, institutional investors are generally more and better informed than individual investors due to their unique skills and abilities to get access to private In addition, because of their large investment stake, institutional investors possess strong voting power and hence affecting the overall investment and business decisions of a company....
5 Pages (1250 words) Essay

Globalization, Liberalization, and Development in China

Firms then believed in new theories of trade such as market-seeking or resources-seeking motive (Liu and Buck, 2009) to internationalize.... The motivation to go out could range from market-seeking strategy to avoidance of country-of-origin effect (Salidjanova, 2011) and is not restricted to strategic-asset seeking motives.... The pull factors that induced ODI from China were natural resource endowments and market potential (Biggeri and Sanfilippo, 2009)....
19 Pages (4750 words) Essay

Exchange of the Products in a Physical Form and Sale or Purchase of Foreign Currency

This research reviews an efficient market hypothesis of the forex market, including fundamental and technical analysis, also offers a brief history on the forex market and overview of the market in an exhaustive manner.... This research essay will make a complete literature review on an efficient market hypothesis of the forex market.... Two major factors are said to be the litmus test of market efficiency: the magnitude of statistical dependence between consecutive movements in exchange rates and the profitability of trading regulations....
18 Pages (4500 words) Literature review

Advanced Investment and Theory

The efficiency of a capital market is determined by its success in incorporating and receiving information.... This essay analyzes that an efficient capital market can be used to mean, a market where the share prices accurately reflect new information and in a real time.... An efficient capital market is the one that incorporates information accurately and in a steady manner into the security prices (Kleinbrod, 2006, Pg.... he weak-form efficient capital market is reached after the information regarding the history of previous returns and prices are fully reflected in the security prices....
8 Pages (2000 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us