Document Type


Date of Original Version



Management Science


We examine the behavior of the Chinese equity markets to determine whether the equity markets are efficient or not. A previously unexplored database provides the source for observing market behavior of the two principal equity markets in China. These markets have unique characteristics different from those in the more established markets in the United States, the United Kingdom and Japan, among others. In particular, we study the role of the financial crises. Our observations suggest that differences in statistical measures occurred before and after the financial crises. In addition, conclusions are drawn about the market efficiency of the Chinese equity markets that are based on well-known analytical methods. On the basis of the analysis, we observe that the equity markets of both exchanges were not efficient before the financial crisis and became efficient to some extent in terms of the weak-form efficiency markets hypothesis during the financial crisis. Finally, note that some changes in the Chinese financial markets occurred during and after the crises to alleviate the premium paid in Chinese markets relative to the same firms’ share in the Hong Kong Stock Exchange.