Stock Market Liberalization and Market Returns in China: Evidence from Qfii Announcement

26 Pages Posted: 4 Dec 2003

See all articles by Mou-Fung Chan

Mou-Fung Chan

Tsinghua University - Department of Accounting

Veicheng Yu

Asian Institute of Management

Date Written: September 30, 2003

Abstract

Stock market liberalization is a decision to allow foreign investors to purchase domestic shares. This paper is an event study on market reactions around the announcement of the Qualified Foreign Institutional Investors (QFII) scheme in China. We find no significant abnormal returns in market indices in the short-term period leading up to the announcement, negative abnormal returns in the short-term period following the announcement, and no significant abnormal returns in the long-term period thereafter. The findings do not comply with the prediction of international asset pricing models. The QFII scheme may not help much in reducing the cost of equity capital and risk premium of China companies.

Keywords: stock market liberalization, market segmentation, QFII, event study

JEL Classification: G1

Suggested Citation

Chan, Mou-Fung and Yu, Veicheng, Stock Market Liberalization and Market Returns in China: Evidence from Qfii Announcement (September 30, 2003). Available at SSRN: https://ssrn.com/abstract=459480 or http://dx.doi.org/10.2139/ssrn.459480

Mou-Fung Chan (Contact Author)

Tsinghua University - Department of Accounting ( email )

Beijing, 100084
China

Veicheng Yu

Asian Institute of Management ( email )

123 Paseo de Roxas
Makati City, Metro Manila
Philippines