Abstract:

The theme of stock market efficiency has received a great amount of attention in terms of theoretical and applied research over the last four decades. Unit root tests are often used to test market efficiency. It is most common to use GMM estimate to test orthogonality property of known information. Cointegration tests and estimate are used to explore the longrun equilibrium. This paper provides a full description for Chinese stock markets' efficiency. These empirical investigations suggest that there are some evidences contradicting the unpredictable criterion of weak-form efficient market hypothesis in Chinese stock markets. We propose that the combination GMM method with cointegration estimate and tests could be a clever method to test the markets efficient and long-run equilibrium between the stock market's indexes and trade volume. We find there is no cointegration between these two variables, suggesting that there might well have speculative factors in the stock markets.