Financial Anomalies: Examination of Chinese B‐share Markets from 1993 to 2006

Abstract

This study investigates the financial anomalies on the Chinese
Shanghai Bâ€share (SHB) and Shenzhen Bâ€share (SZB) markets from
1993 to 2006 by using valueâ€weighted data and equalâ€weighted data.
Before February 2001, the Bâ€shares could be traded by only foreign
investors. However, in February 2001, the Chinese investors were
allowed to invest in the Bâ€share market. When both unadjusted valueweighted
data and unadjusted equalâ€weighted data are used, the study
reveals there is the March effect after February 2001 in both SHB and
SZB markets; however, there is no evidence of the March effect from
the adjusted valueâ€weighted and adjusted equalâ€weighted data for the
same period. Our study shows that the high March market return was
attributable to an unusual return in March 2001 which can be explained
by the influx of funds due to the opening of the Bâ€share markets to
domestic investors. Thus, we do not find clear evidence of seasonality
in the Chinese Bâ€share markets. Nevertheless, the analysis on the
adjusted equalâ€weighted data finds a size effect in the Shenzhen Bshare
market – the smallestâ€size group shows a significant January
effect in the period from 2001 to 2006; which supports Reiganum (1983)
that the January effect is largely a small capitalization phenomenon.
Our findings may influence the investment behaviour of overseas
investors.
Keywords: Chinese Bâ€share Market, Efficient Market, Seasonalities,
Financial Anomalies