The Research On Different Firm Size Seasonality Effect Of Market Return In China’s Stock Market

The Efficient Market Hypothesis was first proposed by Fama in1970. He thoughtthat in the effective market, no matter what kind of securities the investors choosestochastically, they could only obtain normal returns ratio related to the investmentrisk，but could not obtain the abnormal returns by information analysis. Recent thirtyyears，the researches on security market return anomalies have been an important partof the researches on market efficiency，and many behavioral finance researchers try toexplain these．The return seasonal effect and size effect are two of the most importantanomalies.The return seasonal effect means the abnormal return related with season in thestock market.In finance literature， according to the calendar or the length oftime.Seasonality effect includes month-of-the-year effect，day-of-the-week effect andholiday effect, etc. Size effect means stock yields with the company up relative sizedown, especially the market value of the company stock yields less than the marketaverage phenomenon，and call small firm effect.Many western scholars study thereturn seasonal effect and size effect,and get a lot of the conclusion, but previousstudies are less consider the relevance.We want to study seasonal effect of Chinesestock markets from the point of its company size it helps us to further understand thecause to the return seasonal effect and size effect.Chinese stock markets is anemerging market，and has its particularity and independency，so there are potentialdifferences between the size and seasonal movement of Chinese stock markets andthat of other countries.Through the point of company size, the seasonal effect is studied in this thesis.The object of this thesis is to study the existence of seasonality effect in A-sharemarket. We use the monthly return data of A-share indices ranging from January,2000to December,2011to study month-of-the-year effect and we use daily returndata of A-share indices ranging from January4th, l993to December31,2011to studyday-of-the-week effect. The test indicate that the daily return series have no ARCHproperty, while the monthly and quarterly return series do have ARCH property. Inthe following empirical analysis, we use GARCH model to study the month-of-the-year effect, finding that there is month-of-the-year effect in A-share market of ourcountry. We use the liner model to study day-of-the-week effect, finding that there is Monday effect in A-share market of our country. At the same time the author analysessize effect and season effect from the point of the company size premium. Lastly,conclusion and suggestions on further study are also provided based on empiricalstudy.