Market Segmentation and Stock Prices Discount in the Chinese Stock Market: Revisiting B-Share Discounts in the Chinese Stock Market

45 Pages Posted: 27 Dec 2007

See all articles by Oliver M. Rui

Oliver M. Rui

China Europe International Business School (CEIBS)

Wenfeng Wu

Shanghai Jiao Tong University - Antai College of Economics & Management

Bong-Soo Lee

Korea Advanced Institute of Science and Technology (KAIST)

Date Written: October 2007

Abstract

This paper explores the determinants of B-share discounts in the Chinese stock market based on a unique regulatory change in 2001. We find that the B-share discounts declined substantially after the lifting of restrictions on foreign ownership in China, but the H-share discount remained virtually unchanged. Using the intraday data, we find that information flows from the B-share markets to the A-share markets increase significantly after the event, because domestic investors rush into the B-share markets. Using various cross-sectional analyzes, we also find that relative supply and behavior factors such as relative spread (or liquidity) and relative risk affect the discounts throughout the sample period.

Keywords: Market segmentation, Chinese stock markets, Information flow

JEL Classification: G15

Suggested Citation

Rui, Oliver M. and Wu, Wenfeng and Lee, Bong-Soo, Market Segmentation and Stock Prices Discount in the Chinese Stock Market: Revisiting B-Share Discounts in the Chinese Stock Market (October 2007). Available at SSRN: https://ssrn.com/abstract=1029494 or http://dx.doi.org/10.2139/ssrn.1029494

Oliver M. Rui (Contact Author)

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

HOME PAGE: http://https://www.ceibs.edu/rui-oliver

Wenfeng Wu

Shanghai Jiao Tong University - Antai College of Economics & Management ( email )

No. 535 Fahuazhen Road
Shanghai, Shanghai 200052
China

Bong-Soo Lee

Korea Advanced Institute of Science and Technology (KAIST)

373-1 Kusong-dong
Yuson-gu
Taejon 305-701, 130-722
Korea, Republic of (South Korea)

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