Premium
China: Further Evidence on the Evolution of Stock Markets in Transition Economies
Author(s) -
Li XiaoMing
Publication year - 2003
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/1467-9485.5003006
Subject(s) - predictability , economics , stock (firearms) , china , leverage (statistics) , econometrics , leverage effect , emerging markets , financial economics , macroeconomics , volatility (finance) , geography , computer science , mathematics , machine learning , statistics , archaeology , autoregressive conditional heteroskedasticity
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.