Articlebronze2000

SEGMENTATION OF THE A‐ AND B‐SHARE CHINESE EQUITY MARKETS

74 citations0/0 files storedThe Journal of Financial Research

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Financial Markets and Investment Strategies Financial Analysis and Corporate Governance Financial Risk and Volatility Modeling

Abstract

Abstract In this study we use the latent variable asset pricing model to examine the pricing of A and B shares in the Chinese stock markets. The hypothesis tested is whether markets for the A and the B shares of the same companies are segmented. We document only one latent variable in both A‐ and B‐share markets. However, the latent risk premiums for the A and B shares are only weakly correlated, indicating the two‐tier markets are loosely related. The weak correlation implies the two markets reflect different fundamental forces. Additional analysis demonstrates that the Shanghai market responds to the Shenzhen market rather than the other way around.

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References

1964CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*1985A Theory of the Term Structure of Interest Rates 1973An Intertemporal Capital Asset Pricing Model 1981Some properties of time series data and their use in econometric model specification 1985Stock Returns and the Term Structure 1986Predicting returns in the stock and bond markets 1991The World Price of Covariance Risk 1993The Risk and Predictability of International Equity Returns

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