Short-horizon market efficiency, order imbalance, and speculative trading: Evidence from the Chinese stock market

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This paper uses a two-stage regression approach and tick data from 2012 to investigate the factors that affect the short-horizon market efficiency of the Chinese stock market. The findings show that market efficiency is significantly related to certain variables of individual stocks such as capitalization, turnover ratio, return volatility, trading volume, trading cost, and institutional trading. Furthermore, specific features of the Chinese stock market, such as prevalent speculative trading, cause these relations to differ from those in the U.S. stock market. However, speculative trading gradually loses its effect on market efficiency between 10 minutes and 20 minutes in the Chinese stock market.

Author(s):

Yingyi Hu    
Southwestern University of Finance and Economics
China