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China: Further Evidence on the Evolution of Stock Markets in Transition Economies

China: Further Evidence on the Evolution of Stock Markets in Transition Economies We revisit the weak‐form efficiency of China's stock markets by examining its changing behaviour over the entire history of the Shanghai and Shenzhen Stock Exchanges. The Kalman Filter technique is applied to the system consisting of a time‐varying AR model and an asymmetric TGARCH equation. The estimates of predictability combined with other non‐quantifiable, evolutionary characteristics of the markets are used to infer on their efficiency. It is shown that, at their initial development stages, both the Shanghai and Shenzhen markets were inefficient. However, the past decade saw a steady convergence of the two markets towards efficiency. An abnormal leverage effect is detected for Shanghai, but no strong evidence is found that there exists the information transmission between the two markets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Scottish Journal of Political Economy Wiley

China: Further Evidence on the Evolution of Stock Markets in Transition Economies

Scottish Journal of Political Economy , Volume 50 (3) – Aug 1, 2003

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References (22)

Publisher
Wiley
Copyright
Copyright © 2003 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0036-9292
eISSN
1467-9485
DOI
10.1111/1467-9485.5003006
Publisher site
See Article on Publisher Site

Abstract

We revisit the weak‐form efficiency of China's stock markets by examining its changing behaviour over the entire history of the Shanghai and Shenzhen Stock Exchanges. The Kalman Filter technique is applied to the system consisting of a time‐varying AR model and an asymmetric TGARCH equation. The estimates of predictability combined with other non‐quantifiable, evolutionary characteristics of the markets are used to infer on their efficiency. It is shown that, at their initial development stages, both the Shanghai and Shenzhen markets were inefficient. However, the past decade saw a steady convergence of the two markets towards efficiency. An abnormal leverage effect is detected for Shanghai, but no strong evidence is found that there exists the information transmission between the two markets.

Journal

Scottish Journal of Political EconomyWiley

Published: Aug 1, 2003

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