The Study On The Trend Of The Price Differential And Its Influencing Factors Of Dual Listed Companies

Dual listing refers to the listing of the same company on two different stock exchanges(or the common stock exchanges). With the increasing pace of Chinese companies to go for oversea list and those listed abroad try to"come home"in crowds, the price differentials of stocks not only become important to firms, the government and investors but also be a popular issue of research. Gaining a deeper understanding of the price differentials, revealing its trend and finding the factors that cause the price differentials are significant to research the asymptotic trend of price differentials.This paper reviews the motivation of dual listing and analyzes the trend and the factors of price differentials in Western capital markets. There is a brief comparison on"price premium"in developed stock markets and"price discount"in Chinese stock market. Given this ambiguity, this paper researches the behavior of price differentials in two parts and arrives at the following conclusions:Firstly, having given a brief review on the history and current situation of A+H shares and A+B shares, this paper examines 53 Chinese companies that issued both A-shares in mainland and H-shares in Hong Kong and analyses the time series of price differentials. After a brief comparison of time series models, we find that ARIMA(1, 1, 1) specifications are adequate. Based on the above conclusion, ARIMA can offer a sound forecast within a short time.Secondly, based on the four theories about the"price differentials"which were originated by the Western academic community, the author does a research about factors that could cause the price differentials in Chinese stock markets. The empirical studies show that factors that affect the price differentials include liquidity, demand difference and information asymmetry. However, systematic risk is contrary to the hypothesis. Combining the phenomenon that Chinese investors have preferred pannikin stock to grail stock since May 2002, this paper argues that the irrationality of Chinese investors is the reason why the systematic risk is contrary to the hypothesis.Lastly, the author proposes suggestions on improvement of information asymmetry, guiding the investors in a rational way, acceleration of financial innovation in order to enrich the trading products and so on.