A Weak-Form Efficiency Testing of China's Stock Markets

Abstract

The main purpose of this paper is to test the degree of development of China's stock market, as well as its stage. Utilizing the GARCH amended model and the AR-X-GARCH (1, 1) model; we analyzed whether the opportunity for excess returns in China's stock markets exists, and tested the randomness of the returns' series in China's stock market. Finally, we concluded that China's two stock markets in Shenzhen and Shanghai have not reached the significant excess rate of return opportunities, but the stock markets as a whole have not reached the level of the weak-form efficiency. At the same time, we can see that China's stock market is gradually maturing. This can provide a good guide to understand the degree of development of China's stock market, as well as its stage.