The Cause And Trend Of Price Discrepancy In Cross-Listing Under Different Monetary Systems

Along with the acceleration of financial globalization since 1980s, cross-listing on the international capital markets has become a noticeable phenomenon. The events that the Tsingtao Brewery China's IPO was issued in Hong Kong in 1993, opened the prologue that our domestic companies go to the overseas listing. And with the development of cross-listing, it also becomes a trend that domestic large enterprises choose the IPO way.While Cross-listing brings many kinds of influence, it also brings a very interesting phenomenon of market -price discrepancy. The domestic and foreign research about this discrepancies phenomenon, many was the theory explanation and as a result of natural market segmentation, just a few amount of research touched the deep level, but didn't form a system.In this article, we consider the natural market segmentation as a phenomenon of market friction, simultaneously, the market friction can be classified as problems or areas of the market cost. From the perspective of micro-transaction cost and convenience point of view, the major policy obstacles and market segmentation simply can be considered as a part of the cost. From the micro to the macro, step by step, we can get a rational market price discrepancy range, which it can be verified in the developed country's capital market.The innovation of this article is: by using a simple analytical model, we quantify the social phenomenon. The extending of cost concept and the closed-arbitrage model are the basis of this article analysis, and at the same time, the background of exchange rate appreciation is also a relatively new perspective.The core idea of this article is that the stock price in devalued currency system should not be lower than the homogeneous stock in appreciation currency system with the theoretical analysis. This analysis is based on the value of the stock investment nature, and most of these high-quality companies, which named blue-chip in stock markets, are the focus of this paper. On the contrary, small market value companies and junk bond, the majority of cross-listing companies, which is the core of most of relevant literatures, is not the concern and the core of this article, because it's not being with the value of the investment, noise trading and speculation is the fundamental reason why "high inside-low outside" phenomenon happens. This is an important innovation of this article.In fact, discrepancy phenomenon is just one example of the market partial imbalance, the same as other imbalances. With the progress of civilization and society, the deepening of economic integration, the release of economic control, the upgrade of the social awareness, these questions will be resolved one by one slowly, which is an inevitable result of a logical necessity of the social development. Finally, the idea of changes in institution and social development is the basis of this article, and also is the radical hypothesis of the final argumentation.