Cross-sectional Research On Stock Price Discrepancy Of A Share And H-share Dual-listed Companies

According to the law of one price, the price of an asset of a certain company should be the same on capital markets the company listed disregarding the transaction location, if the global capital markets is fully integrated. However, for various reasons, capital market segmentation leads to the price discrepancy between the same assets in different markets. On the one hand, one certain dual-listed company has a changing stock price discrepancy over time; On the other hand, different dual-listed company's shares perform different price discrepancies at the same time. Because of the segmentation, there is a huge gap between the stock prices of A-shares and H-shares of A-H dual-listed companies. Scholars' research about foreign capital shares discount mainly concentrated on the price discrepancies between A-shares and B-shares, research about the price discrepancies between A-shares and H-shares are rarely. Moreover, scholars concentrated on time series analysis of market segmentation's influence on asset prices, ignoring the price discrepancy's cross-sectional features. Under the background of China's capital market's opening up and the strengthening linkage between China's and Hong Kong's stock market, in-depth study of A-H share price discrepancies' cross-sectional distribution and its features and causations conduces to establish a correct understanding of the risk on stock markets and to explore the influence factors of asset pricing; it conduces to the listed companies' timely adjustments in accordance with market conditions and the company's business strategy; it also helps investors make investment decisions among a large number of dual-listed companies; finally it also contributes to share the experience of mature markets and give advice to improve the operation of the securities market and provide a theoretical reference.This thesis refers to the research results of Foreign and domestic researchers about price discrepancies that listed in two places, combining the actual situation of Mainland and Hong Kong stock market, selecting 53 companies as the object of study, exploring parity between January 4th, 2007 to December 31th, 2008. Through the establishment of an empirical econometric model this thesis analyses on cross-sectional distribution of price discrepancies of China's A-H shares of dual-listed companies in-depth. Through theoretical analysis and empirical research, this study found that the premium / discount, A shares to H shares of different dual-listed companies vary. Moreover, The factors related to information asymmetry, risk aversion, differences in liquidity, differences in stock supply, differences in investment philosophy, systemic risk, speculative differences, and differences in market conditions are influential. Besides, the factors of risk, listed companies' profitability and solvency, systemic risk, the rate of non-tradable shares and other factors accounted a significant impact on A shares pricing. And risk factors, the profitability, operating efficiency, and the solvency of listed companies, liquidity, systemic risk, and market share accounted a significant impact on H shares pricing.Through theoretical analysis and empirical research, this thesis suggest that arbitrage mechanism, more transparent information disclosure, more institutional investors, and other policy recommendations be drawn to reduce the impact of market segmentation, and promote the integration of capital markets.