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Stock Price Interaction and Price Differential Between Dually-Listed A- and B-Shares in China’s Stock Market: A Comparison Before and After the B-Share’s Opening Policy

Journal of Financial Studies

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Title Stock Price Interaction and Price Differential Between Dually-Listed A- and B-Shares in China’s Stock Market: A Comparison Before and After the B-Share’s Opening Policy
 
Creator Chien-Fu Chen
Shih-Wei Liu
 
Description This paper investigates how the efficiency of Chinese stock markets and B-share discounts are affected by the policy of B-share’s opening to domestic residents in 2001 for seventy-one A- and B-share dually-listed companies. The empirical results are as follows. First, before the period of the B-share opening to domestic residents, there is no cointegration relationship between A- and B-share prices for most dually-listed stocks. Second, after the period of the B-share opening to domestic residents, there is a cointegration relationship between the A- and B-share prices. Third, the results of Granger-causality test show that foreign investors possess slightly information advantage over the Chinese domestic investors before the period of the B-share opening to domestic residents, but the Chinese domestic investors have an information advantage after the B-share’s opening to domestic residents. Fourth, we find that discounts in the B-share price are due to liquidity-differential and demand-differential hypotheses. Finally, after the period of the B-share opening to domestic residents, the discounts in the B-share price decline substantially due to the reinforcement of liquidity-differential hypothesis and demand-differentialhy pothesis.
Key words: China’s stock markets, Market segmentation, Cointegration, Granger causality
 
Publisher Journal of Financial Studies
財務金èžå­¸åˆŠ
 
Date 2011-03-10
 
Type —
 
Format application/pdf
 
Identifier http://www.jfs.org.tw/index.php/jfs/article/view/2011079
 
Source Journal of Financial Studies; Vol 17, No 2 (2009); 139
財務金èžå­¸åˆŠ; Vol 17, No 2 (2009); 139
 
Language —