Research On Information Efficiency Measurement In Financial Market,Theoretical Analysis And Application

Information and information efficiency of financial market have always been a hot issue in academic research.The efficient market theory holds that the market information efficiency is reflected in the response of asset prices to information.Most of the existing literature studies the response of financial asset prices to the impact of market information,and explains the price anomalies(overreaction,underreaction,price reversal and drift,etc.).However,there are still some problems worthy of in-depth study,such as:how to quantitatively measure the market contribution of information?Can increasing the amount of information in the market improve the speed of information integration into the stock price and improve the contribution of the information market?With the increase of market information,what is its cumulative role in stock price?In addition,is stock price synchronization an effective indicator of market information efficiency?Previous studies have a lot of controversy about this,and take stock price synchronization as an effective index of market information efficiency,but draw inconsistent conclusions.Compared with western developed financial markets,Chinese stock market has a serious phenomenon of"rising and falling together".Among the 47 global stock markets according to Eun et al.(2014),the stock price synchronization of Chinese A-share market ranks first in the market.Therefore,how to reduce the synchronization of stock price and improve the information content of stock price characteristics has always been a hot topic concerned by Chinese market managers and academia.The solution of these problems is of great significance for deeply understanding the reaction mechanism of financial market to information,improving market efficiency and the phenomenon of high stock price synchronization in Chinese stock market.It also provides a reference for market regulators and investors to analyze the role of market information.In view of this,this paper mainly focuses on the new measurement of financial market information efficiency(information contribution to market(ICM),cumulative information’s contribution to market(CICM),stock price asynchronous contribution),carries on the corresponding theoretical analysis,and carries on the application research combined with Chinese stock market.Theoretical analysis:on the one hand,establish the indicators of information contribution to market and cumulative information’s contribution to market,and study the dynamic mechanism and information efficiency of financial market response to information from the perspectives of traders’limited rationality,prediction precision and the relationship between information and noise;On the other hand,establish the contribution rate index of stock price asynchrony,and theoretically studies the relationship between idiosyncratic information and market information efficiency based on the stock price response mode of idiosyncratic information and the relationship between idiosyncratic information and noise.Applied research mainly uses the data of Chinese stock market to construct a new index to measure the impact of company idiosyncratic information and noise on stock price asynchrony:the contribution rate of stock price asynchrony.From the perspective of the contribution rate of stock price asynchrony,this paper analyzes the relationship between stock price asynchrony and its contribution rate and company idiosyncratic information in Chinese stock market,Then verify whether Chinese stock market is dominated by information or noise.First,new measurement of market information efficiency I:information contribution to market and cumulative information’s contribution to market.This paper studies the dynamic mechanism and information efficiency of financial market response to information from the perspectives of traders’limited rationality,prediction accuracy and the relationship between information and noise.Firstly,referring to the market transaction model framework of Chen Qiang et al.(2016),this paper analyzes the dynamic changes of information,its contribution to market and cumulative contribution to market under the condition of complete rationality of traders;Secondly,the dynamic changes of information and its contribution to market(cumulative contribution to market)are analyzed under the conditions of traders’limited rationality,prediction accuracy and negative correlation between information and noise.It is found that information has an inverted U-shaped relationship with its market contribution and an S-shaped relationship with its cumulative market contribution.Under the condition of limited rationality of traders,when there is less market information,insufficient information response makes the contribution of information to market(cumulative contribution to market)greater than moderate and overreaction;When there is more market information,the information contribution to market(cumulative contribution to market)decreases due to insufficient or excessive information response,but the cumulative market contribution of insufficient information response is always higher than that of overreaction;The negative correlation between information and noise will reduce the information contribution to market(cumulative contribution to market).When both conditions exist,the reduction of information contribution to market(cumulative contribution to market)will have a superposition effect.Marginal contribution:(1)it puts forward the concepts of information contribution to market and cumulative contribution to market,quantitatively measures the response of financial market to information,and enriches the measurement indicators of information efficiency.(2)it is found that information has an inverted U-shaped relationship with its market contribution and an S-shaped relationship with its cumulative market contribution,which makes up for the deficiency of existing literature research.(3)from the perspective of traders’limited rationality and the negative correlation between information and noise,this paper analyzes the response degree of financial market to information,and makes a more realistic explanation for the market price anomaly.(4)the conclusion of this paper provides a new regulatory idea for market regulators.It is found that the contribution of information market has a decreasing effect.When the amount of information in the market is appropriate,its market contribution is the largest;Therefore,in order to improve information efficiency,policy makers can consider improving the contribution of the information to market rather than the amount of information disclosure in the market.Second,new measurement of market information efficiency II:the contribution rate of stock price asynchrony.As a measure of market information efficiency,stock price asynchrony has been controversial,and the relevant conclusions are quite different,even contradictory.Therefore,this paper proposes the contribution rate index of stock price asynchrony,and theoretically studies the relationship between idiosyncratic information and market information efficiency based on the stock price response mode of idiosyncratic information and the relationship between idiosyncratic information and noise.The results show that in the information dominated market,the relationship between idiosyncratic information and stock price asynchrony shows a positive U-shaped;In the noise dominated market,the relationship between idiosyncratic information and stock price asynchrony is either negative or inverted U-shaped;In a special market where information and noise are not dominant,the relationship between idiosyncratic information and stock price asynchrony depends on the market’s response to idiosyncratic information and Information-Noise correlation.The contribution rate of stock price asynchrony and idiosyncratic information is positively correlated.Marginal contribution:(1)the contribution rate index of stock price asynchrony is proposed,which solves the problem of failure of stock price asynchrony index to measure market information efficiency.(2)for the first time,this paper analyzes the relationship between idiosyncratic information and stock price asynchrony contribution rate from two perspectives:the possible positive correlation between idiosyncratic information and stock price volatility(stock price asynchrony contribution of idiosyncratic information)and the negative correlation with noise,which unifies the inconsistency of existing research and enriches the theory of market efficiency.(3)This paper provides a reference for policy makers aiming at improving market information efficiency.They should correctly grasp their own market characteristics and explore the positive correlation between idiosyncratic information and stock price asynchronous contribution rate and the negative correlation with noise,so as to improve market information efficiency more effectively and pertinentlyThird,the application research of the contribution rate of stock price asynchrony in Chinese stock market,whether the stock price asynchrony in Chinese stock market is dominated by information or noise.So far,this paper has not determined whether the contribution of noise to the stock market is non synchronous or non synchronous.Firstly,this paper constructs the idiosyncratic information and noise index to measure the company,constructs the idiosyncratic information index by using the principal component analysis method,and obtains the noise index by referring to the method of Lin Zhongguo et al.(2012).Secondly,it constructs a new index to quantitatively measure the impact of corporate idiosyncratic information and noise on stock price asynchrony:the contribution rate of stock price asynchrony.Referring to the idea of Roll(1988),this paper analyzes the interpretation degree(R~2)of corporate idiosyncratic information and noise on individual stock return,and analyzes the relationship between corporate idiosyncratic information and the contribution of non synchronization of stock price.Then,it analyzes the relationship between corporate idiosyncratic information and noise;Furthermore,we empirically analyze the relationship between corporate idiosyncratic information and stock price asynchrony and its contribution rate.Finally,it analyzes the differences of driving factors of stock price asynchrony in Chinese stock market in different market environments and different sectors.The study found that:using the data of Chinese stock market,the empirical analysis found that although Chinese stock market is noisy,it is an information dominated market,and there is a positive U-shaped relationship between idiosyncratic information and stock price asynchrony.In different market environments and different market segments,there are differences in the impact of company idiosyncratic information and noise on the non synchronization of stock price.Among them,in the bull market,the impact of noise on the non synchronization of stock price has increased,that is,the contribution rate of noise to the non synchronization of stock price has been improved;In the bear market,the impact of corporate idiosyncratic information on stock price asynchrony is increased,and its contribution rate to stock price asynchrony is improved,and the impact of noise on stock price asynchrony is reduced;In the shock market,the impact of company idiosyncratic information and noise on the non synchronization of stock price is uncertain,but the impact of noise is high.The influence of idiosyncratic information on stock price asynchrony in the main board increases,and the influence of noise decreases;In the small and medium-sized board and gem,the impact of noise on stock price asynchrony increases,and the impact of corporate trait information decreases,which is greater in the gem.Marginal contribution:(1)the principal component analysis method is used to construct the idiosyncratic information index.Previous studies have selected one or more indicators of a certain aspect as the proxy index of the company idiosyncratic information(such as Lin Zhongguo et al.,2012;Hu Jun and Wang Zhen,2015).The trait information index constructed by the principal component analysis method in this paper is more comprehensive,making its description of the company idiosyncratic information more scientific.(2)This paper constructs a quantitative index to measure the impact of corporate idiosyncratic information and noise on stock price asynchrony-the contribution rate of stock price asynchrony,which is not available in the previous literature.(3)Based on previous studies,this paper analyzes the relationship between corporate idiosyncratic information content and noise.Previous literature rarely studies the relationship between corporate idiosyncratic information and noise.Even individual Literature(Zhang Yongren and Li Xiaoyu,2010;Lin Zhongguo et al.,2012;Shen Yongtao and Gao Yusen,2020;Jiang Hao,2021)only makes a simple analysis from the qualitative aspect,lacking more in-depth theoretical and empirical analysis.(4)It provides a reference for relevant policy makers.According to their own market characteristics,we should explore the market response mode of idiosyncratic information and the negative correlation mode between idiosyncratic information and noise,and formulate more effective and targeted measures,so as to effectively improve the efficiency of market information.(5)This paper analyzes the differences of the impact of company specific information content and noise on the asynchrony of stock price in different market environments and different sectors,especially studies the information attributes of sectors,and provides more targeted suggestions for market managers.