Institution Construction and Evolving Stock Market Efficiency: An Empirical Research Based on the Law and Finance Theory

The traditional research on Efficiency Market Hypothesis emphasizes econometric analysis of stock price behavior, but neglects the influence of institutional factors on information efficiency, especially that of law and regulations. Meanwhile, it does not realize the efficiency is an evolutionary process. This article, based on the law and finance theories, examines the relationship between law evolution and the stock market efficiency in China. The results indicate that China's stock market become more efficient as more laws be effective, but a few regulations can bring negative effect on market efficiency.