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Stock market efficiency in China: evidence from the split-share reform

Author

Listed:
  • Andrea Beltratti

    (Bocconi University)

  • Bernardo Bortolotti

    (Bocconi University and University of Turin)

  • Marianna Caccavaio

    (Bank of Italy)

Abstract

We perform an event study to investigate the efficiency of the Chinese stock market. We study the reaction of stock returns and trading volumes to the 2005-2006 structural reform which allowed the transformation of non-tradable shares (NTS) into tradable shares (TS) through payment of a compensation to holders of TS. We find evidence of positive abnormal returns in the few days before the announcement of which companies will undergo the reform process and in the ten days after the readmission to trading of participating companies following the determination of the compensation, but no abnormal returns after the payment itself. From a methodological viewpoint, our contribution is the introduction of a bootstrap procedure that is designed to replicate the actual degree of covariance across firms.

Suggested Citation

  • Andrea Beltratti & Bernardo Bortolotti & Marianna Caccavaio, 2014. "Stock market efficiency in China: evidence from the split-share reform," Temi di discussione (Economic working papers) 969, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_969_14
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    Cited by:

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    7. Siva Kiran & Prabhakar Rao.R, 2019. "Analysis of Stock Market Efficiency in Emerging Markets: Evidence from BRICS," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 22(72), pages 60-77, June.
    8. Hong, Hui & Chen, Naiwei & O’Brien, Fergal & Ryan, James, 2018. "Stock return predictability and model instability: Evidence from mainland China and Hong Kong," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 132-142.
    9. Tingting Zhang & Shunbo Yao & Jinna Yu & Assem Abu Hatab & Zhen Liu, 2020. "Effects of China’s Collective Forestland Tenure Reform Policies on Forest Product Firm Values," Land, MDPI, vol. 9(4), pages 1-20, April.

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    More about this item

    Keywords

    Chinese stock market; market efficiency; event study; bootstrap;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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