An empirical analysis of the Adaptive Market Hypothesis with calendar effects:Evidence from China

Adaptive Market Hypothesis (AMH) claims that the degree of market efficiency is related to environmental factors characterizing market conditions. This paper examines the AMH through four calendar effects in China stock market. In particular, we employ subsample analysis and rolling window analysis as well as construct investment strategies based on calendar effects to determine whether they perform as AMH implies. The empirical findings show that both the four calendar effects’ performance and excess returns of the investment strategies vary from time to time. Generally speaking, the empirical results suggest that AMH gives a better explanation for the market dynamics in China stock market.