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Financial crisis and the market efficiency in the Chinese equity markets

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  • Fang Chen
  • Jeffrey Jarrett

Abstract

We examine the behavior of the Chinese equity markets to determine whether the equity markets are efficient or not. A previously unexplored database provides the source for observing market behavior of the two principal equity markets in China. These markets have unique characteristics different from those in the more established markets in the United States, the United Kingdom and Japan, among others. In particular, we study the role of the financial crises. Our observations suggest that differences in statistical measures occurred before and after the financial crises. In addition, conclusions are drawn about the market efficiency of the Chinese equity markets that are based on well-known analytical methods. On the basis of the analysis, we observe that the equity markets of both exchanges were not efficient before the financial crisis and became efficient to some extent in terms of the weak-form efficiency markets hypothesis during the financial crisis. Finally, note that some changes in the Chinese financial markets occurred during and after the crises to alleviate the premium paid in Chinese markets relative to the same firms’ share in the Hong Kong Stock Exchange.

Suggested Citation

  • Fang Chen & Jeffrey Jarrett, 2011. "Financial crisis and the market efficiency in the Chinese equity markets," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 16(3), pages 456-463.
    • Handle: RePEc:taf:rjapxx:v:16:y:2011:i:3:p:456-463
    DOI: 10.1080/13547860.2011.589632
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    References listed on IDEAS

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    2. Ma, Pengcheng & Li, Daye & Li, Shuo, 2016. "Efficiency and cross-correlation in equity market during global financial crisis: Evidence from China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 444(C), pages 163-176.
    3. Zeng, Rong (Ratchel) & Oh, Won-Yong & Zhu, Pengcheng, 2023. "Will investors’ excitement last? Determinants of investors’ responses to cross-border acquisitions by Chinese firms," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
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