Price Discovery for Segmented US-Listed Chinese Stocks: Location or Market Quality?

28 Pages Posted: 2 Feb 2010

See all articles by K.C. Chen

K.C. Chen

California State University, Fresno - Craig School of Business

Guangzhong Li

Sun Yat-Sen Business School, Sun Yat-Sen University

Lifan Wu

California State University, Los Angeles - Department of Finance and Law

Date Written: 2009-04

Abstract

This study extends the cross-listing literature by examining how, and to what extent, the trading of cross-listed China-backed ADRs on the New York Stock Exchange contributes to information flows and price discovery for the corresponding stocks traded in China's A-share market. We find that the cross-listed US prices and Chinese prices are not cointegrated in the long-run and the home market plays a far more important role in both price discovery and volatility spillover than does the US market. The home bias hypothesis still holds for the segmented Chinese A-share market and the location where price discovery actually originates is the essential factor in the process of international information transmission.

Suggested Citation

Chen, K.C. and Li, Guangzhong and Wu, Lifan, Price Discovery for Segmented US-Listed Chinese Stocks: Location or Market Quality? (2009-04). Journal of Business Finance & Accounting, Vol. 37, Issue 1-2, pp. 242-269, January/March 2010. Available at SSRN: https://ssrn.com/abstract=1546158 or http://dx.doi.org/10.1111/j.1468-5957.2009.02153.x

K.C. Chen (Contact Author)

California State University, Fresno - Craig School of Business ( email )

Fresno, CA 93740
United States

Guangzhong Li

Sun Yat-Sen Business School, Sun Yat-Sen University ( email )

135 Xingang Xi Road
Guangzhou, Guangdong 510275
China

Lifan Wu

California State University, Los Angeles - Department of Finance and Law ( email )

5151 State University Dr
Los Angeles, CA 90032
United States
213-343-2870 (Phone)

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