COINTEGRATION OF CHINESE A AND B SHARES

Project: Externally funded project

Project Details

Description

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 non-tradeable shares, high growth rate and large B-share market capitalisation relative to the A-share market capitalisation. Our findings suggest that the relaxation of the investment restrictions decreased the segmentation between the A- and B-share markets in China.
StatusFinished
Effective start/end date01.10.200231.12.2008

Research Output

Panel Cointegration of Chinese A and B Shares

Ahlgren, N., Sjö, B. & Zhang, J., 2009, In : Applied Financial Economics. 19, 23, 13 p.

Research output: Contribution to journalArticleScientificpeer-review

2 Citations (Scopus)

Panel Cointegration of Chinese A and B Shares

Ahlgren, N., Sjö, B. & Zhang, J., 2008, Chinese A and B shares, Market segmentation, Information flow, Panel unit root and cointegration tests. Gothenburg: School of Business, Economics and Law, University of Gothenburg, 35 p. (School of Business, Economics and Law, University of Gothenburg. Working Papers in Economics; no. 300).

Research output: Chapter in Book/Report/Conference proceedingChapterScientificpeer-review