Study on the Comprehensive Stock Market Quality Evaluation System

In the past two decades China’s stock market has achieved great progress, not only in market value but also in its system and operational mechanisms. In general, it has grown increasingly healthy. However, at present, when investors and stakeholders evaluate a stock market, they still tend to focus on the stock market index to measure the overall fluctuation of the market (for example the Shanghai Composite Index, CSI 300, and so on). This is problematic. First, such indices have certain faults in their calculation methods, which cannot effectively reflect the real situation of the market. Secondly, various sides only stress price indices, instead of observing and evaluating the comprehensive quality of a stock market. As the mainstream stock market indices have design faults and market observations are not multi-dimensional, there is a necessity to discuss the building of a comprehensive evaluation system for China’s stock market. This is the first topic of this chapter. The second is to design a reasonable and multidimensional evaluation system and choose reasonable variables to represent the needed indicators. The third topic is to analyze each indicator’s changes over a decade and discuss their reasonable interval values respectively. The fourth is to determine each indicator’s weight and therefore build a comprehensive evaluation system for China’s stock market. Lastly, this chapter discusses changes in the comprehensive quality of China’s stock market over the last decade and compares and contrasts China’s stock market with those in both developed and other BRIC countries.