Qfii System On The Chinese Stock Market, The Effectiveness Of Empirical Research

The system of QFII has been carried out in China from December 1, 2002 with two purposes: one is to attract abundant international funds and the other is to increase the efficiency of the securities market. As one of the important measures for financial reformation, QFII has attracted so many attentions and many discussions about its advantages and disadvantages were made from the day when it was carried out. However, most of the discussions are on the theoretic level and empirical study is infrequent.The researches about the efficiency of the securities market can trace back to 1900 when Bachelier published the famous article. In that article, Bachelier defined the Random Walk Hypothesis which means the changes of price are random and can't be forecasted. In 1970, Efficient Market is defined formally by Fama who was an American professor in finance. The definition is widely recognized by the public means the price of a financial asset reflects all the available information and responds only to the unexpected news. In an economic sense, no one can always gain excess profit in an efficient market. However, some abnormalities in the securities market have attracted people's attentions in recent years, two of the representative ones are momentum phenomena and reversal phenomena. Because the theory of efficient market can't explain these phenomena satisfactorily, they have been taken as excuses to refuse the theory.However, if it was proved that those abnormalities exist in some market, it means that the future changes of price can be expected by analysis on the previous records and the investment strategies made according to those analysis should get excess income. This is just the symbol of Weak-form Efficient Market. Many researchers have done many researches to their own country's security market since the two phenomena were initiated and found they are universal on different level. So, momentum and reversal phenomena have became the important symbols of the efficiency of security market.In this essay, I have done empirical study on the momentum and reversal phenomena about the stocks invested by QFII. Different with our expectation, the system of QFII hasn't increased the efficiency of our security market. Although the system of QFII shouldn't be totally denied by this result, we really should recognize it again and adjust our unseasonable expectation on it. The efficiency of security market is a complicated problem and its improvement needs so many kinds of supports besides QFII, especially financial laws and other systems.