Stock Prices in a Speculative Market: The Chinese Split-Share Reform

49 Pages Posted: 12 Mar 2009

See all articles by Andrea Beltratti

Andrea Beltratti

Bocconi University - Department of Finance

Bernardo Bortolotti

Bocconi University; University of Turin

Marianna Caccavaio

Università Bocconi

Date Written: February 18, 2009


In 2005-2006 China reformed its stock market by eliminating non-tradable shares. The regulator set general guidelines and then assigned responsibility for implementation to each company. We derive relations that should have been followed by the prices of stocks and exploit a company-level data set to compare the actual and the theoretical price reactions. We find evidence for abnormal returns both before the beginning of the reform and during the reform. Cross-sectionally, abnormal returns are associated mainly with turnover and compensation. This shows that in a speculative market, investors do not properly react to unambiguous corporate actions.

Keywords: Speculation, Chinese Stock Market, Market segmentation, Event study, Market Efficiency

JEL Classification: G14, N25

Suggested Citation

Beltratti, Andrea and Bortolotti, Bernardo and Caccavaio, Marianna, Stock Prices in a Speculative Market: The Chinese Split-Share Reform (February 18, 2009). Paolo Baffi Centre Research Paper No. 2009-39. Available at SSRN: or

Andrea Beltratti (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136

Bernardo Bortolotti

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136

University of Turin

Via Po 53
Torino, Turin - Piedmont 10100

Marianna Caccavaio

Università Bocconi ( email )

Piazza Sraffa 11
Milan, MI 20136

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