Location of Trade, Ownership Restrictions, and Market Illiquidity: Examining Chinese A- and H-Shares

36 Pages Posted: 30 Jul 2003

See all articles by Steven Shuye Wang

Steven Shuye Wang

School of Business, Renmin University of China

Li Jiang

Hong Kong Polytechnic University

Multiple version iconThere are 2 versions of this paper

Abstract

We examine Chinese companies that issue both A-shares in mainland China and H-shares in Hong Kong. A-shares are restricted to mainland Chinese investors, while H-shares are available to Hong Kong and international investors. We find that H-shares exhibit significant exposure to Hong Kong market factors and behave more like Hong Kong stocks than mainland Chinese stocks. However, H-shares retain significant exposure to their domestic market and therefore provide foreign investors with diversification opportunities. We find a large time-varying H-share price discount relative to A-shares, and this discount is highly correlated with domestic and foreign market factors and relative market illiquidity.

Keywords: Cross Listing, Ownership Restriction, Market Sentiment, Illiquidity

JEL Classification: G10, G15

Suggested Citation

Wang, Steven Shuye and Jiang, Li, Location of Trade, Ownership Restrictions, and Market Illiquidity: Examining Chinese A- and H-Shares. Available at SSRN: https://ssrn.com/abstract=410702 or http://dx.doi.org/10.2139/ssrn.410702

Steven Shuye Wang (Contact Author)

School of Business, Renmin University of China ( email )

Beijing
China
8610-6251-8856 (Phone)

HOME PAGE: http://rbs.org.cn

Li Jiang

Hong Kong Polytechnic University ( email )

Hung Hom, Kowloon
Hong Kong

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