Market efficiency anomalies : A study of seasonality effect on the Chinese stock exchange

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The Chinese stock market is a remarkable emerging market, the two stock markets Shanghai and Shenzhen Stock Exchanges were both established in 1990, and since then they have been playing a very important role in Chinese economy. More and more attention is focused on the emerging Chinese market, and investors have been trying to find the opportunity to achieve abnormal returns through the Chinese stock market. We name this phenomenon market efficiency anomaly, one pattern of which is seasonality effect. In our study, we would like to choose the seasonality effect as the approach.This study focuses on Shanghai Stock Exchange Composite Index, and we settle two research questions: Does seasonality effect exist in Chinese Stock exchange? Is the seasonality effect persistent over times?We try to test the seasonality in Chinese stock market by day of the week effect, January effect and semi-month effect. Deductive approach and quantitative research method are used in this thesis. To analyze seasonality effect, the data has been collected from Shanghai Stock Exchange Index and has been tested in four periods: 1992-1996,1997-2001, 2002-2006 and the whole period 1992-2006. Null hypothesis and T-test with a=0.05 is used to test the seasonality effect. The results show that seasonal anomalies like Day of the week effect, positive March effect, and negative July effect exist in the Chinese stock market, while semi-month effect does not occur significantly; but the existing seasonal effect is not persistent over times. The...