The Research On The Stock Price Difference Under The Condition Of Segmental Markets

The price difference of the stock market is a more recent issue on the asset pricing of international capital market, especially to the development countries, on one hand, the rapid development of economy needs more capital and different financing ways, on the other hand, domestic capital market usually being in the preliminary or growing period of development. So developing the overseas market is a helpful attempt and selection. There are two ways in Chinese market to raise capital from the foreign investors; one way is to raise capital through Share B both in Shanghai and Shenzhen Stock Exchange, and where there are many companies to issue stock to the foreign investors, but the proportion foreign investors owing the Share B is limited by the ownership restrictions. The other way is to list in the international stock market such as Hong Kong Stock Exchange, New York Stock Exchange, and some European stock market and Japan stock market and so on. As far as the above two ways are concerned, the paper mainly researches the reasons of the segmentation between Share A and Share B or Share H stock, and also explains the price difference of the cross listing companies.Different from the other development countries, the price of Share B and Share H of the cross listing companies is usually lower than Shares A, which is called"Chinese stock puzzle". The puzzle induces many literatures to discuss the phenomenon, and the main reason is that the difference is caused by the market segmentation, the other explanation is the corporate governance hypothesis, that is, the improvement of the corporate government results in the increase of the firm value and return of the cross listing companies. The paper discusses the reasons and characters of price difference from the two aspects. There are four parts mainly in the paper:(1) Testing the"integration-segmentation"among Share A, Share B and H through the Threshold Generalized Autoregressive Conditional Heteroscedasticity method and the"spillover effect"model to judge the market segmentation. Different with the previous models, the paper divides the close-to-close return into close-to-open and open-to-close return, and researches the"spillover effect"between the open-to-close return of Share A (Share B and Share H) and the close-to-open return of Share B and Share H (Share A) for the cross listing companies with the TARCH method, and also researches the"spillover effect"between Share A and Share B (Share H) through open-to-close return. As a consequence, there exists asymmetric information spillover between Share A and Share B (Share H), which reflects the segmentation between markets in China.(2) Researching the difference of initial public offering underpricing between Share A and Share B for the cross listing companies. The paper finds that both investor sensitivity and information asymmetry can affect the difference of underpricing between Share A and Share B with the methods of Spearman Rank Correlation and cross section regression. Hot issue represents the effect of investor's sensitivity on stock price difference, which has a significantly negative effect on IPO underprcing difference; interval between the public offering day and the first trading day reflects the impacts of information asymmetry, which has a significantly positive effect on t IPO underpricing.(3) As far as the price difference between Share A and Share B is concerned, the paper attributes it to information asymmetry, demand difference, liquidity difference and investor's risk preference difference. Panel data analysis indicates that all the four factors may affect trading price difference significantly. Specifically, information asymmetry, liquidity difference, and risk aversion difference have positive correlation with trading price difference, while demand difference has a negative effect on the price difference. (4) The article tests whether stricter information discloses and accounting criterion in the Stock B and Stock H lead to the difference of firm value measued by Tobin's Q and annual return between dual listing companies and non-dual listing companies using panel date. The results of regression show that information discloses and accounting criterion increase the firm value of dual listing companies, but have no significant effect on the annual return.