Panel cointegration of Chinese A and B shares
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
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.
Chinese A and B shares, Market segmentation, Informa- tion ow, Panel unit root and cointegration tests.
IdentifiersURN: urn:nbn:se:liu:diva-90043DOI: 10.1080/09603100903122182OAI: oai:DiVA.org:liu-90043DiVA: diva2:611785