The Information Efficiency of QFII’s Investment in China’s Capital Market

Abstract

This paper takes stock price synchronization and price delay as indicators of information efficiency, and uses mixed cross-sectional data of listed companies into which Qualified Foreign Institutional Investors (QFII) have made investments, to study the impact of QFII’s investment behaviors on the information efficiency of China’s stock market. The results show that QFII’s investments can improve the information efficiency of China’s stock market, but its impact is varied. The impact of QFII’s investments on market information efficiency is more significant in bear markets than in bull markets, the impact on private enterprises is more significant than on state-owned enterprises, and the impact on Small and Medium Enterprises (SME) market is more significant than in main board market. Further research also finds that QFII has a certain threshold effect on the information efficiency of China’s stock market. This research paper provides a problem-solving perspective for China’s capital markets to achieve information efficiency through opening up, and at the same time warns against financial risks.

Keywords

• qualified foreign institutional investors
• stock price synchronization
• mixed cross-sectional data
• information efficiency