Further Evidence on the Efficiency of the Chinese Stock Markets

This paper examines the relative efficiency of the Chinese A- and B-share markets following the deregulation of the B-share market which widened ownership to include domestic investors. Applying both parametric and non-parametric variance ratio tests to the daily data of 304 A-shares and 66 B-shares over the period 1 January 1996 to 30 April 2005, the paper finds that A-shares are characterised by a greater level of efficiency than are B-shares, although the efficiency of both markets has improved following the regulatory change. Overall, the results suggest that the Chinese stock markets are characterised by information asymmetry, although the timely access to high quality information that domestic investors in the A-share market enjoy, has improved the efficiency with which information is incorporated into the prices of B-shares