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| Dat Bue Lock |
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| ''The China A shares follow random walk but the B shares do not'' |
| ( 2007, Vol. 7 No.9 ) |
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| The China A-Share stocks and the China B-Share stocks are common stocks issued by companies incorporated in China. These two classes of common stocks differ in the nationality of the investors each is restricted to by law. For the most part, the A shares, quoted in the Chinese yuan, or renminbi, are for Chinese nationals while the B shares, quoted in foreign currencies, are for non-Chinese nationals and residents of Macau, Hong Kong and Taiwan. This paper identified eighty-six companies issuing both the A and B shares and tested if these shares weekly returns follow a random walk. Employing the Lo and MacKinlay variance ratio test statistics, it is discovered that five times more B shares rejected the random walk as did the A shares. Moreover, both the Shenzhen and Shanghai B-Share indexes reject the random walk while neither the Shenzhen nor Shanghai A-Share index reject the random walk. |
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| Manuscript Received : Apr 10 2007 | | Manuscript Accepted : Jun 08 2007 |
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