Financial Anomalies: Examination of Chinese B?share Markets from 1993 to 2006

This study investigates the financial anomalies on the Chinese Shanghai B?share (SHB) and Shenzhen B?share (SZB) markets from 1993 to 2006 by using value?weighted data and equal?weighted data. Before February 2001, the B?shares could be traded by only foreign investors. However, in February 2001, the Chinese investors were allowed to invest in the B?share market. When both unadjusted valueweighted data and unadjusted equal?weighted data are used, the study reveals there is the March effect after February 2001 in both SHB and SZB markets; however, there is no evidence of the March effect from the adjusted value?weighted and adjusted equal?weighted data for the same period. Our study shows that the high March market return was attributable to an unusual return in March 2001 which can be explained by the influx of funds due to the opening of the B?share markets to domestic investors. Thus, we do not find clear evidence of seasonality in the Chinese B?share markets. Nevertheless, the analysis on the adjusted equal?weighted data finds a size effect in the Shenzhen Bshare market – the smallest?size group shows a significant January effect in the period from 2001 to 2006; which supports Reiganum (1983) that the January effect is largely a small capitalization phenomenon. Our findings may influence the investment behaviour of overseas investors.