A Behavioral Analysis Of The Price Differentials Between A And B Shares In Chinese Stock Market

There is a special phenomenon in China's stock market, that is the sharesdenoted the same listed companies' proprietary equity are restricted to trade indifferent markets in the face of different investors, and large differences always existin their prices between these dual listed companies. Namely, the price of B sharesmostly available to the foreign investors is different largely from the price of Ashares mostly available to the domestic investors. The reasons for this phenomenonof price differentials have became the hotspot issues lately paid attention by theforeign and domestic scholars, who have been given several theoretical explanations.This paper applies BAPM (Behavioral Asset Pricing Model) which based on theclassical CAPM model to give both the theoretical and empirical explanations to thisspecial phenomenon.Through the empirical evidence, we believe: there obviously exists NoiseTrader Risk (NTR) in both A and B share markets, and just because of its existence,the traditional asset pricing method which we used to employ to work out the shares'prices is no longer consistent with the real prices. Apart from Differential RiskHypothesis, Asymmetric Information Hypothesis, Differential Demand Hypothesis,Liquidity Hypothesis, the Limitation of Assets Pricing Method should also beincluded for the causes of the differentials between A and B shares. If wetake NTR into consideration, the large differences existed in prices between these duallisted companies could be partially explained.