Information Transmission in the Shanghai Equity Market

Posted: 21 Sep 1998

See all articles by D. Michael Long

D. Michael Long

University of Tennessee, Chattanooga - Department of Accounting

Janet D. Payne

Texas State University, San Marcos - Department of Finance and Economics

Chenyang Feng

Providian Financial Corporation - Credit Group

Abstract

We examine market efficiency and the price-volume relation in Class A and Class B shares on the Shanghai exchange relative to the U. S. equity market. Variance ratios and runs tests for market efficiency support the hypothesis that both Class A and Class B markets follow a random-walk. In addition, the augmented Dickey-Fuller test supports the null hypothesis that the Shanghai market follows a random-walk process with drift. We also find a significantly positive relation between changes in volume and absolute price returns in both Class A and Class B shares, which is consistent with studies on U.S. equity markets. However, when using signed returns our results are stronger than most U.S. studies on price-volume relations. We find no significant difference between the price-volume correlations in Class A and Class B shares. However, the price-volume correlations in both Class A and Class B shares are significantly stronger than the price-volume correlation in the U.S. market. This suggests that volume may be more important to information transmission in China than in the U. S. markets.

JEL Classification: G12, G14

Suggested Citation

Long, D. Michael and Payne, Janet D. and Feng, Chenyang, Information Transmission in the Shanghai Equity Market. Journal of Financial Research. Available at SSRN: https://ssrn.com/abstract=127568

D. Michael Long (Contact Author)

University of Tennessee, Chattanooga - Department of Accounting ( email )

615 McCallie Avenue
306 Fletcher Hall
Chattanooga, TN 37403-2598
United States
423-785-2112 (Phone)
423-755-5255 (Fax)

Janet D. Payne

Texas State University, San Marcos - Department of Finance and Economics ( email )

San Marcos, TX 78666
United States

Chenyang Feng

Providian Financial Corporation - Credit Group ( email )

San Francisco, CA 94105
United States
415-278-4107 (Phone)
415-278-6013 (Fax)

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