Efficiency of the capital market

Author: Cao Honghui
Publisher:
Publish Date: 2002-12-01
Features: The Chinese capital market has always been a hot and challenging topic in the formation of the market economy system. Initially, debates centered on its nature and status, followed by disagreements over its role in economic growth. This book evaluates the current efficiency of the Chinese capital market and proposes methods for improving its efficiency from the perspective of financial strategic development.
First, the book reviews and critiques the theoretical research on efficiency in money, capital, finance, and capital markets by domestic and international academia. Based on this foundation, it elaborates on the macroeconomic significance and microeconomic connotations of capital market efficiency from the perspective of emerging markets in China's transition period. It analyzes the partial equilibrium of the Chinese capital market under incomplete competition and examines the impact of dynamic non-equilibrium in the capital market on its efficiency, based on the general equilibrium relationship between the capital market and the efficiency of economic growth. Additionally, it analyzes rent-seeking behavior caused by unequal financing opportunities among enterprises of different ownership structures, as well as the damage to market efficiency due to the fragmentation of market structure and function caused by the division of shareholder rights. It explores the negative impacts of major realistic factors contributing to the loss of capital market efficiency, such as property rights systems, market bubbles, and capital flight, and preliminarily establishes an indicator system and methods for evaluating capital market efficiency from perspectives like the rate of capital deepening, rate of capital formation, capital allocation efficiency, and capital usage efficiency.
Second, using the Chinese stock market as an example, it employs linear analysis and nonlinear random walk tests, as well as market bubble tests, weekend effect tests, monthly effect tests, and excessive reaction tests of the capital market to the reduction of state-owned shares.
Third, by establishing empirical models with high-performance stock portfolios and underperforming stock portfolios, it tests the efficiency of Shanghai and Shenzhen stock markets in allocating funds based on price signals. The book also analyzes the factors influencing capital market efficiency from both internal and external perspectives.