Price discovery for Chinese shares cross-listed in multiple markets

Patricia L. Chelley-Steeley, James M. Steeley

Research output: Contribution to journalArticle

Abstract

In this article we study the relationship between security returns cross-listed on the A share market of China and the H share market at the Stock Exchange of Hong Kong (SEHK). Most of these securities are also cross-listed on other markets. An important feature of this article is that we focus on the multilateral relationships between all cross-listed markets rather than concentrating only on the bi-lateral relationship between A and Hong Kong H shares. Using the impulse response functions and the variance decompositions from a Vector Autoregressive (VAR) process we show that the returns to the A share market are almost exclusively determined by domestic factors. In contrast, we find that the H share market is influenced by both the A share market within China and foreign stock markets elsewhere in the world. Impulse response functions suggest that innovations to the A share market and the Hong Kong H share market are partly transmitted to each other and to stock markets outside China. We show that liquidity has an important role to play in determining the impact that the home market has on cross-listed variance decompositions.
Original languageEnglish
Pages (from-to)1587-1601
Number of pages15
JournalApplied Financial Economics
Volume22
Issue number19
Early online date27 Apr 2012
DOIs
Publication statusPublished - 1 Oct 2012

Keywords

  • A and H shares
  • comovement
  • segmentation

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