Analysis of efficiency for Shenzhen stock market: Evidence from the source of multifractality

This paper extends the work in Wang, Liu and Gu (2009) [Analysis of efficiency for Shenzhen stock market based on multifractal detrended fluctuation analysis. International Review of Financial Analysis, 18, 271-276] by investigating the dynamics of two main sources of multifractality over time. Using multiscale detrended fluctuation analysis, we find that the medium-term and long-term auto-correlations of Shenzhen stock market became weaker and weaker over time but the degrees of short-term efficiency seemed to do not change. Evidence shows that the degree of the fat-tail distribution of the market returns abruptly decreased after the price-limited reform. After the reform, the degree of fat-tail distribution seemed to run an upward trend but it went down finally. From the contributions of two sources, we conclude that the multifractality generally displayed a downward trend indicating an upward trend of efficiency only in the medium- and long-term which further confirms the results in Wang, Liu and Gu (2009). We find that some abnormal "jumps" in the evolutions of short-term and medium-term correlation behaviors can be related to the abruptly exogenous events. Some problems about efficiency and operations of Shenzhen market are also discussed at last.Multiscale analysis Detrended fluctuation analysis Shenzhen stock market Efficiency