The Influence of the COVID-19 Pandemic on Asset-Price Discovery: Testing the Case of Chinese Informational Asymmetry

81 Pages Posted: 9 Jun 2020

See all articles by Shaen Corbet

Shaen Corbet

Dublin City University ; University of Waikato - Management School

Greg Hou

University of Waikato - Management School

Yang Hu

University of Waikato - Management School

Les Oxley

University of Waikato - Department of Economics and Finance; University of Waikato

Date Written: June 9, 2020

Abstract

The circumstances surrounding the outbreak of the COVID-19 pandemic have generated substantial international political strain as governments attempt to mitigate the widespread associated social and economic repercussions. One theory has focused on the potential for Chinese informational asymmetry. Using Chinese financial market data, we attempt to establish the scale and direction of information flows during multiple distinct phases of the outbreak. Two specific results are identified. Firstly, the majority of domestically-traded Chinese stocks present evidence of significant information flows at a far earlier stage than internationally-traded comparatives, suggesting that domestic investors recognised the dangers associated with COVID-19 far in advance of the rest of the world as the severity of the domestically-reported Chinese news was not appropriately recognised by international investors. Secondly, while evidence of safe-haven and flight-to-safety behaviour is evident throughout traditional energy and precious metal markets, cryptocurrencies became informationally-synchronised with Chinese equity markets, indicating their use as an investor safe-haven, a concerning outcome for international policy-maker and regulatory authorities due to the fragility of these developing markets.

Online Appendices available at: https://ssrn.com/abstract=3623252

Keywords: COVID-19; Coronavirus; China; Price Discovery; Information Asymmetry

Suggested Citation

Corbet, Shaen and Hou, Greg and Hu, Yang and Oxley, Les, The Influence of the COVID-19 Pandemic on Asset-Price Discovery: Testing the Case of Chinese Informational Asymmetry (June 9, 2020). Available at SSRN: https://ssrn.com/abstract=3623274 or http://dx.doi.org/10.2139/ssrn.3623274

Shaen Corbet (Contact Author)

Dublin City University ( email )

Dublin 9
Ireland

University of Waikato - Management School ( email )

Hamilton
New Zealand

Greg Hou

University of Waikato - Management School ( email )

Hamilton
New Zealand

Yang Hu

University of Waikato - Management School ( email )

Te Raupapa
Private Bag 3105
Hamilton, Waikato 3240
New Zealand

Les Oxley

University of Waikato - Department of Economics and Finance ( email )

Private Bag 3105
Hamilton, 3105
New Zealand

University of Waikato ( email )

Hamilton
New Zealand

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