Stock market efficiency in China: Evidence from the split-share reform

Andrea Beltratti, Bernardo Bortolotti, Marianna Caccavaio

Research output: Contribution to journalArticlepeer-review


We perform an event study to investigate the efficiency of the Chinese stock market. We study the reaction of stock returns and trading volumes to the 2005-2006 structural reform which allowed the transformation of non-tradable shares (NTS) into tradable shares (TS) through payment of a compensation to holders of TS. We find evidence of positive abnormal returns in the few days before announcement of which companies will undergo the reform process, that can be explained by information leakage and not by a compensation risk premium, and in the ten days after the readmission to trading of participating companies following the determination of the compensation, which is consistent with a Merton visibility effect. We use a bootstrap procedure designed to replicate the actual degree of covariance across firms.

Original languageEnglish (US)
Pages (from-to)125-137
Number of pages13
JournalQuarterly Review of Economics and Finance
StatePublished - May 1 2016


  • Bootstrap
  • Chinese stock market
  • Event study
  • Market efficiency

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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