Efifcient Market Hypothesis And The Analysis Of The Effectiveness Of China’s Stock Market

Efficient market hypothesis is a cornerstone of the modern financial economics.Research on the effectiveness of the market is always the key issue of finance. Famagave the definition of EMH which is widely accepted in1970, and it formed theefficient market theory frame system, making EMH the foundation theory of finance.Therefore, the research of the theory of effective market is of great theoretical andpractical significance. In China, with the development of the stock market in morethan20years, stock market expands rapidly, and the proportion of the total stockmarket value in GDP is also gradually rising. The stock market as the barometer ofnational economy, its economical status becomes more and more important. In theprocess of buds, birth, development and standardization, China’s stock marketbecomes mature, but it also exposes some problems like the “stock market bubble”,“policy city” and “information asymmetry”. The study of China’s stock marketeffective levels, on one hand, it can optimize the resource allocation, and provide thesecurities regulators reference when they are formulating laws and regulations; on theother hand, it can help investors make reasonable investment decision, and investreasonably.Scholars throughout the world have researched a lot on EMH. First, this articlesummarizes the research results, and points out the problems of the existing research.Based on the problems, this paper makes some improvements. Secondly, it putsemphasis on the theoretical basis of market efficiency, discussing the contents and theforms of market efficiency, a prerequisite for the basic content. Then, on the basis of acorrect understanding of the efficiency of the stock market, it expounds therelationship of information, stock prices and market efficiency, providing a basis forempirical research and analysis. Then, it tests the weak-form efficiency of China’sstock market by using empirical methods, and tests the semi-strong efficiency byusing of event research on new shares. It analysis whether it has beensemi-strong-form efficiency or not from two angles: superior earnings andinformation content. Finally, based on the empirical results, it analyzes the reasons ofthe low efficiency of China’s stock market, and put forward policy recommendations.As an emerging market, China’s stock market was set up not quiet long ago.And the research on market efficiency has just started lately. It needs the summary of its relevant experience. This assay use the method of normative research combinedwith empirical research, according to the latest data, to analysis the efficiency ofChina’s stock market, and has drawn the following conclusions: First, China’s stockmarket has been weak-form efficiency, and the stock market of Shanghai is moreefficient than the one in Shenzhen; Second, China’s stock market has not yet beensemi-strong-form efficiency, but the level of efficiency is increasing. To improve thedegree of effectiveness of the stock market, we should make great efforts to train anddevelop the institutional investors, to achieve the stock circulation, regulate thebehavior of investors, improving the rational level of the stock market. At the sametime, we should also establish a strict multi-level regulatory system, so as to makeChina’s stock market more and more mature.