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

摘要

This paper uses a two-stage regression approach and tick data from 2012 to investigate the factors that affect short-horizon market efficiency in the Chinese stock market. The findings show that market efficiency is significantly related to certain variables for individual stocks, such as return volatility, trading volume, closing price, and trading costs. Furthermore, one specific characteristic of the Chinese stock market, prevalent speculative trading, causes these relations to differ from those in the US stock market. The stocks with high return volatility and high price level are more efficiently priced in short horizons because they have an elevated level of speculative trading, which gradually loses its effect on market efficiency in the Chinese stock market after 15-20 min.