An Empirical Study On Market Segmentation And H Share Discount

In China's security market, because of the situation of market segmentation existing, both B-Shares and H-shares are at a discount or at a premium to A-Shares. In theory, risk preference differences, information asymmetry, liquidity differences, demanding/supplying differences and so on give explanations to the reasons of market segmentation and discounting problem. There are many researches in the discount of B-shares to A-shares in the Chinese stock market, while because of the lack of H-shares data, many researches in the discount of H-shares remain in the theoretical analysis, or based on incomplete data, the empirical results are not perfectly explainable, and, many results are not the same.This paper is just based on the above reasons and the previous results of researches, such as model of price discrimination, model of liquidity differences, and analyzes the influencing factors of H-Shares' discount to A-Shares by empirical study. The empirical results show that, in the factors, risk preference differences, liquidity differences, information asymmetry, significantly affect the discount of H-shares, but demanding/supplying differences are not significantly.We can see, market segmentation in Chinese stock market has its own special features. Aware of this, refer to the experiences from other countries or regions, China can find its own ways and measures to eliminate market segmentation and further the integration of stock market.