A Study On The Discount Of B Shares Based On Noise Trade

In China stock markets,there is a phenomenon of discount of B shares compiring with A shares for a long term.B shares which present foreign investment,persist on discounting to A shares,and to a serious degree.This problem not only puzzles domestic scholars,but also causes considerable concern to foreign experts.Therefore,in reference to preliminary studies of domestic and foreign scholars,using regression analysis as a tool,this paper discusses the discount problem of B shares basing on noise trade theory.Through theoretical analysis,this paper finds out that there is a huge transaction difference between A,B shares market because of different investor group.More noise trade in A shares market than in B shares market,there is a higher noise trader risk in A shares market which is one of important reasons of B shares'discount.By analying the influence of policy of B shares market opening to domestic residents in 2000,this paper finds out that the policy made noise trade of A shares market spill over to B shares market,which increased the noise trader risk of B shares market,so the discount reduced.Through selecting several acting variables of noise trade,this paper makes a empirical study on the discount of B shares using panel data model,and the outcome supports our theory.This initially confirms that the difference of noise trade is one of important reasons of B shares'discount.Based on theory and empirical studies,this paper draws several conclusions,and gives relative policy advices to reduce the difference of noise trader between A and B shares market,and then to reduce the discount of B shares.