The Analysis Of Difference Between The Prices Of Chinese A&H Twins Stock On The Basis Of Limited Arbitrage Theory

Due to capital market segmentation,the difference between the prices of foreign ownership stocks and domestic ownership stocks is very apparent.Unlike orthodox researches on capital market segmentation,this paper is to analyse this kind of phenomenon at the view of limited arbitrage theory.In this paper,factors affecting arbitrage trade on A&H twins stocks were summarized to two points:QFII system and noise trader risk.Taking 24 Chinese A&H twins stocks as samples,this paper investigated the relationship between this two factors and price difference by the means of modern econometrics including cross-sectional data regession,Granger test and multiple cointegration.By the way of descriptive analysis on weighted price difference ratio of 24 twins stocks,this paper found that QFII system made arbitrage trade on twins stocks engaged by foreign investors possible.As a result,there was apparent decline in price difference ratio.Meanwhile,Granger test on QFII fund quota and price difference ratio provided evidence that increase in QFII fund quota resulted in rise of latent arbitrage scale,which caused decrease in price difference ratio.As far noise trader risk,this paper took NCT value as measurement to noise trade and created a multiple linear regression model.In this model,NCT value and other factors were regarded as independent variables while price difference ratio was engaged as dependent vairable.After testing this model,we confirmed that the comparative intensive noise trade of A stocks had influenced price difference ratio of twins stocks apparently.This model meaned that noise trader risk actually affected arbitragur`s strategy and made arbitragur postpone arbitrage trade or lower the scale of arbitrage trade.This made the difference between the prices of twins stocks existed for long time.Finally,this paper made a trial to testify directed relationship between the noise trader risk and price difference ratio through DSSW model of behavioral finance theory,but the result of the test failed to meet our expectation due to the small sample numbers and short examination period.On the base of analysis comleted,this paper put forward clue to remove the obstacles of arbitrage to let up the difference between the prices of twins stocks.