| Financial market segmentation and the resulting price difference of homogeneous assets generally exist in the financial markets of Chinese mainland and Hong Kong.In recent years,although the reform and opening up of Chinese financial market has continued to deepen,the separation of the financial market from the world financial system and the internal separation of the financial market have improved.However,populism and trade protectionism are on the rise,and there is a trend of anti-globalization in the world market.The outbreak of the COVID-19 at the end of 2019 has brought huge challenges to the process of market integration,hindering the normal flow of people,goods,information,and capital,the degree of financial market segmentation tends to intensify.In April 2022,the "Opinions of the Central Committee of the Communist Party of China and the State Council on Accelerating the Construction of a National Unified Market" was released,clearly proposing to establish a unified national market system and rules,and accelerate the development of a unified capital market.High-quality promotion of the construction of a unified national market,the construction of a new development pattern of "dual cycles",and the smooth circulation of various elements of the market are inseparable from the integration process of the financial market.Eliminating the fragmentation of the financial market and promoting the integrated development of the financial market cycle is also the meaning of accelerating the pace of RMB internationalization and forming a high-level opening-up situation.This article focuses on the segmentation phenomenon of the financial derivatives market and the stock market in Hong Kong and the Mainland,and selects two closely related segmented markets,the Hong Kong covered warrant and option market,the A-share market and the H-share market,as representatives of the "soft segmentation" and "hard segmentation" respectively,as well as representatives of financial derivatives market segmentation and stock market segmentation,study the price difference problem of homogeneous assets caused by market segmentation.The content of the research revolves around three parts: first,the segmentation of the derivatives market and the phenomenon of price differences.Taking the price difference between Hong Kong individual stock covered warrants and option products as the research object,this paper explores the impact of liquidity differences on the price difference,compares the differences in Hong Kong individual stock covered warrants and options in terms of price,liquidity,and pricing efficiency.From the perspective of liquidity,this paper reviews the premium phenomenon in the warrant market in the mainland.The second is the segmentation of the stock market and the phenomenon of price difference,taking the price difference between A shares and H shares as the research object.It consists of two parts.The first part studies the performance of the intraday price difference between A-H shares and the explanatory power of high-frequency traditional factors.The second part studies the asynchronous trading hours of the Mainland and Hong Kong(11:30-12:00 in the morning;15:00-16:00)on the intraday spread of A-H shares.The third is the research on the correlation between derivatives and stock market segmentation and pricing.Taking A,H shares,and covered warrants and options with H shares as the underlying objects as the research objects,it explores the impact of Hong Kong covered warrants and options market segmentation on the AH stock price difference.and the impact of the A-H share market split on Hong Kong covered warrants and option spreads.On the basis of literature review,this paper constructs a systematic theoretical framework.Based on the high-frequency transaction data of Hong Kong stocks,warrants,options,and futures markets,as well as the mainland A-share and B-share markets,this paper uses econometric methods to analyze from the perspective of financial derivatives market,stock market,and the correlation between the two markets,made an in-depth study on the price difference of homogeneous assets caused by market segmentation,and drew the following conclusions.First,from the perspective of financial derivatives market segmentation,this paper focuses on the impact of liquidity on Hong Kong covered warrants and option spreads,and explains the paradox that "European options of the same specification are more expensive than American options".The research finds that:(1)In the Hong Kong market of China,there is a significant premium for individual stock covered warrants compared with individual stock options,and the premium of the put option group is higher than that of the call option group.(2)The difference in liquidity is the key factor that makes European-style covered warrants of the same specification more expensive than American-style options,which can significantly explain the price differences of option derivatives with different exercise methods,and has more significant explanatory power for premium of out-of-the-money and long-term covered warrants.The premium of covered warrants over options is also affected by factors such as counterparty credit risk,investor preference,information asymmetry,volatility discovery ability,exercise method,market maker behavior,and investor sentiment.(3)This paper further studies the liquidity of warrants and options markets in Hong Kong,and finds that from the perspective of market width,depth and elasticity of liquidity,the market-wide liquidity of covered warrants for individual stocks in Hong Kong is far better than that of individual stocks options market in most periods of time.In addition,this paper finds that the pricing efficiency of the covered warrant market in Hong Kong is higher than that of the option market,and the relatively better liquidity of the covered warrant market is an important reason for the difference in pricing efficiency.(4)This paper also revisited the premium phenomenon in the warrant market in the mainland from the perspective of liquidity,matched Hong Kong warrants with mainland warrants according to the target company,and found that the warrants of the same target company traded in the mainland are much more expensive than those traded in Hong Kong.The difference in liquidity caused by different trading systems is an important reason for the premium in China’s warrant market.Second,from the perspective of stock market segmentation,this paper focuses on the intraday price difference of A-H shares and the impact of asynchronous trading hours on it.The research found that:(1)The intraday premium of A-H shares showed a time series feature of "significantly lower at the opening of the morning session,and significantly increased at the opening of the afternoon session and the closing of Hong Kong stocks".Asynchronous trading sessions and the "T+1" trading system are the institutional reasons behind this phenomenon.In addition,the liquidity difference hypothesis,the information asymmetry hypothesis,the difference demand hypothesis and the risk preference difference hypothesis have a strong explanatory power to the intraday premium of A-H shares.(2)The asynchronous trading hours of the Chinese mainland and Hong Kong stock markets have a significant positive impact on the A-H share premium.On the whole,the extra one-hour trading time of H shares in the afternoon(15:00-16:00)increased the premium of A-H shares at the opening of the next morning;the extra half-hour trading time of H shares in the morning(11:30-12:00)increased the A-H share premium at the opening of the noon that day;and the asynchronous strength of stock trading was significantly positively correlated with the A-H share premium.The difference-in-differences analysis shows that the two trading time synchronization policies adopted by the Hong Kong Stock Exchange in 2011 and 2012 significantly reduced the A-H share premium.(3)The heterogeneity analysis shows that the positive effect of asynchronous trading hours on the A-H share premium is positively related to the number of A-shares in circulation,and negatively related to the risk tolerance of A-share investors,the number of investors and the investment value of A-shares.(4)The existence of a premium for A-H shares does not mean that A shares are overvalued.The pricing efficiency of the A-share market is better than that of the H-share market.The implementation of the Shanghai-Hong Kong Stock Connect policy has improved the pricing efficiency of the two markets at the same time,and the improvement effect on the A-share market is more significant.Third,from the perspective of the correlation between financial derivatives and stock market segmentation and pricing,this paper mainly explores the impact of Hong Kong covered warrants and options market segmentation on the A-H stock price difference and the impact of A-H share market segmentation on Hong Kong covered warrants-option spreads.The research found that:(1)An active financial derivatives market helps alleviate the segmentation of the cross-listed stock market,and the A-H share premium is negatively correlated with the trading volume of option financial derivatives(especially individual stock options);Financial derivatives transactions reduce the degree of information asymmetry of H-share investors,thereby reducing the A-H share premium;the results of heterogeneity analysis show that when the degree of market segmentation is stronger,the trading activity of option financial derivatives has a more obvious weakening effect on the premium of A-H shares.(2)The divided covered warrants and options market has an asymmetric impact on the A-H share premium,and the A-H share premiums of the following three types of cross-listed stocks decrease in order: stocks without option products,stocks with only covered warrant products,Stocks with both option and covered warrant products.(3)The relief of the A-H share market segmentation brought about by the implementation of the Shanghai-Hong Kong Stock Connect has significantly reduced the premium between the covered warrants and options with the Shanghai-Hong Kong Connect stock as the underlying stock,and has reduced the degree of segementation between the Hong Kong covered warrant market and the option market to a certain extent.This paper expands the asset pricing theory under financial market segmentation from the theoretical level.For innovation in asset pricing theory,this paper incorporates the influence of homogeneous financial derivative price difference and trading time factors on the A-H stock price difference into the existing theoretical framework of asset pricing under the "soft segmentation" and "hard segmentation" of the financial market,and tries to analyze it from the perspective of related financial market segmentation.In terms of empirical evidence,the research in this paper is based on the intraday high-frequency perspective,which expands the intraday pricing research of the stock and derivatives markets.Chapter 4 of this article extends the research object of Li and Zhang(2011)from index options to individual stock options,and for the first time discovers and explains the phenomenon that European options are more expensive than American options of the same specification.Chapter 5 of this article first pays attention to the intraday variation of A-H share premium and the influence of asynchronous trading hours on it.However,the minimum granularity of the existing research on A-H stock price difference is only daily,and the difference in trading time system between the two places is ignored.The sixth chapter of this paper studies for the first time how the segmentation of related financial markets affects the spread of homogeneous assets,and reveals the mutual correlation between the two groups of markets,Hong Kong covered warrants and options,as well as A shares and H shares. |
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