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Geographical Locations and Market Efficiency of Listed Companies—Analysis Based on the Chinese Market

In: Ieis 2020

Author

Listed:
  • Ying Ren

    (Beijing Jiaotong University)

  • Bowen Pan

    (Central University of Finance and Economics)

  • Chunyi Wang

    (The Experimental High School Attached to Beijing Normal University)

  • Ruoyu Yan

    (The Experimental High School Attached to Beijing Normal University)

  • Mingyin Zhang

    (Beijing Jiaotong University)

Abstract

Several researches on behavioral finance indicate that the geographical locations of listed companies can affect investors’ behaviors, return on investment or stock prices. Based on what has been achieved, this article studies whether the geographical locations of listed companies affect the weak-form market efficiency defined by Fama (J Finan 25(2):383-417, 1970 [1]). This article selects geographical and historical data of more than 1000 stocks traded on the Shanghai and Shenzhen stock exchanges between 2009 and 2018 and analyzes this issue by defining three financial centers and eight central cities and using the ADF test and variance ratio test. The test results show that the closer a listed company is to a financial center (or a central city), the more likely that its share price performance tends to conform to the weak-form efficient market hypothesis. On the contrary, the farther away a listed company is from a financial center (or a central city), the more likely that its share price performance tends to deviate from the weak-form efficient market hypothesis.

Suggested Citation

  • Ying Ren & Bowen Pan & Chunyi Wang & Ruoyu Yan & Mingyin Zhang, 2021. "Geographical Locations and Market Efficiency of Listed Companies—Analysis Based on the Chinese Market," Springer Books, in: Menggang Li & Gábor Bohács & Guowei Hua & Daqing Gong & Xiaopu Shang (ed.), Ieis 2020, pages 141-153, Springer.
    • Handle: RePEc:spr:sprchp:978-981-33-4363-4_11
    DOI: 10.1007/978-981-33-4363-4_11
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