International Journal of Business and Management; Vol. 10, No. 5; 2015 ISSN 1833-3850 E-ISSN 1833-8119 Published by Canadian Center of Science and Education The Empirical Analysis of Index Effect in Chinese Stock Market: Based on the SHSZ 300 Index Yanan He1 & Zongjun Wang1 1 School of Management, Huazhong University of Science and Technology, China Correspondence: Yanan He, Huazhong University of Science and Technology, Wuhan, China. E-mail:
[email protected] Received: February 9, 2015 Accepted: April 3, 2015 Online Published: April 20, 2015 doi:10.5539/ijbm.v10n5p182 URL: http://dx.doi.org/10.5539/ijbm.v10n5p182 Abstract Index effect is an abnormal phenomenon in the security market. It is contrary to the efficient market hypothesis (EMH) and has been well-observed in mature markets. As an emerging market, China plays a more and more essential role in the world. In 2005, first composite index—the SHSZ 300 Index, which combines Shanghai and Shenzhen stock markets was launched in China and got the chasing of investors since then. We attempt to find the performance of index effect in this newly index and we are interested in whether this so-called composite index is more perfect than the traditional single-market index in China or not. Furthermore, we will determine the stage of development of Chinese stock market with an international perspective. The result exhibits that the SHSZ 300 Index has a significant index effect around announcement date (AD) and relatively weak index effect on effective date (ED), corresponded with the price pressure hypothesis. Investors can make extra profit from this effect.