Testing Weak-Form Efficiency of The Chinese Stock Market and Hong Kong Stock Market

This study examines the random walk hypothesis to determine the validity of weak-form efficiency for Shanghai, Shenzhen and Hong Kong Stock Exchanges. Daily returns from 2001-2010 for Shanghai A and B shares, Shenzhen A and B shares and Hong Kong Hang Seng Index are used in this study. The random walk hypothesis is examined by using four statistical methods, namely a serial correlation test, an Augmented Dickey-Fuller Unit Root test, a runs test and a variance ratio test. The empirical results of this study are consistent with the assumption that developed stock markets are more efficient than emerging stock markets. Moreover, since China has issued several policis and measures to improve market efficiency in Chinese stock makkets, China stock markets have become more efficient than before