Comparative Research on Capital Allocation Efficiency of Stock Market Between China and UK

Yan-liang ZHANG, Zi-wei YANG

Abstract


The British stock market is the most internationalized stock market in the world, and its capital allocation function is excellent. There are many references for China to draw lessons from it. With the development of “Shanghai-London stock connection”, China and the UK are getting closer and closer to the two major economies in the world. On the basis of the Jeffrey Wurgler (2000) capital allocation efficiency model, this study selects the financing amount and GDP data of the Chinese and English stock markets in the past 2000-2016. And the Granger causality test and the VAR model are used to compare the relationship between the financing amount and the economic growth of the Chinese and English stock markets. The study finds that there is a long-term equilibrium relationship between GDP and stock market funding in both countries. And the capital allocation efficiency of the UK stock market is higher than that of the Chinese stock market.

Keywords


Stock market, Efficiency of capital allocation, Shanghai-London stock connection


DOI
10.12783/dtssehs/icessh2018/23824

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