Abstract
AbstractThe behavior of stock markets with regard to the stock prices and stock returns is important to traders and investors in optimizing the output of their portfolio. This paper sought to develop an insightful understanding of the Efficient Market Hypothesis with respect to the Chinese stock market. More specifically, the weak-form EMH shows that share prices are supposed to represent all historical price as well as the volume of trade implying that stock prices appear to imitate a random walk. This papers’ main objective was to ascertain whether the Chinese capital market is productive in the weak-form sense, using indices from the Shanghai and Shenzhen Stock. Moreover, it also wanted to make a comparison with the US stock market to gauge the one that is better. The data on monthly closing prices for the three stock markets: Shanghai. Shenzhen, and NASDAQ were obtained from Yahoo Finance. By utilizing two main tests (run test and serial autocorrelation test), the results indicate that the Chinese stock market is not weak form efficient. Moreover, the paper finds similar trends among the three stock markets used in the study (Shanghai, Shenzen, and NASDAQ).KeywordsEfficient Market HypothesisStock marketsSecuritiesWeak-form EMHStock returns
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