Abstract
This study investigates the impact of the exchange risk on B-share discount by developing an estimation model to decompose the valuation differential into two components, the difference between the expectation of future exchange rate and spot exchange rate and the difference between A- and B-shares’
expected returns, which both contain the exchange risk. The empirical tests explore that USD and HKD real exchange rates do matters for the B-share markets in SHSE and SZSE on the market level, however,CNY real exchange rate does not affect the A-shares’ expected returns in both stock exchanges. But when moving down to the industry level, the exposures to USD and HKD exchange risk become less obvious.Although it is hard to detect the clear pattern of impacts of real exchange rates on B-share discounts through A- and B-share expected returns, it is quite easy to find the effects of the Changes of exchange
rates CNY/USD and CNY/HKD on B-share discounts. Based on this study, if the investors expect strong CNY in the future, then the B-share discounts will decline.
expected returns, which both contain the exchange risk. The empirical tests explore that USD and HKD real exchange rates do matters for the B-share markets in SHSE and SZSE on the market level, however,CNY real exchange rate does not affect the A-shares’ expected returns in both stock exchanges. But when moving down to the industry level, the exposures to USD and HKD exchange risk become less obvious.Although it is hard to detect the clear pattern of impacts of real exchange rates on B-share discounts through A- and B-share expected returns, it is quite easy to find the effects of the Changes of exchange
rates CNY/USD and CNY/HKD on B-share discounts. Based on this study, if the investors expect strong CNY in the future, then the B-share discounts will decline.
| Original language | English |
|---|---|
| Non-refereed scientific journal | Global Conference on Business & Finance Proceedings |
| Volume | 8 |
| Issue number | 1 |
| Pages (from-to) | 478-486 |
| Number of pages | 9 |
| Publication status | Published - 06.01.2013 |
| MoE publication type | A4 Article in conference proceedings |
| Event | 2013 Winter Global Conference on Business and Finance (GCBF) - Las Vegas, United States Duration: 02.01.2013 → 05.01.2013 |
Keywords
- 511 Economics
- KOTA2013