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Panel cointegration of Chinese A and B shares
Department of Finance and Statistics, Hanken School of Economics,, Helsingfors, Finland.
Swedish Agency for Development Evaluation, Karlstad, Sweden.ORCID iD: 0000-0002-8145-1000
Center for Finance, University of Gothenburg, Sweden.
2009 (English)In: Applied Financial Economics, ISSN 0960-3107, E-ISSN 1466-4305, Vol. 19, no 23, 1859-1871 p.Article in journal (Refereed) Published
Abstract [en]

We study information flows in China's stock markets. By using panel data methods we test for a unit root in the price premium of domestic investors’ A shares over foreign investors’ B shares, as well as cointegration between the A- and B-share prices on the Shanghai and Shenzhen stock exchanges. We find that the A-share premia are nonstationary, and that the A- and B-share prices are not cointegrated up till January 2001. After February 2001, when domestic investors were allowed to trade B shares, the A-share premia become stationary and the A- and B-share prices cointegrated. One interesting result from the panel data analysis is that most firms’ A and B shares are cointegrated, but not all firms. Cointegration is more likely for firms with a small A-share premium, low ratio of nontradeable shares, high growth rate and large B-share market capitalization relative to the A-share market capitalization. Our findings suggest that the relaxation of the investment restrictions decreased the segmentation between the A- and B-share markets in China.

Place, publisher, year, edition, pages
Routledge, 2009. Vol. 19, no 23, 1859-1871 p.
Keyword [en]
Chinese A and B shares, Market segmentation, Informa- tion ‡ow, Panel unit root and cointegration tests.
National Category
URN: urn:nbn:se:liu:diva-90043DOI: 10.1080/09603100903122182OAI: diva2:611785
Available from: 2013-03-18 Created: 2013-03-18 Last updated: 2015-06-02

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Sjö, Bo
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