A + H Shares Of Dual Listed On The Price Behavior Of Listed Companies In China

When a stock is listed in both A-shares market and H-shares market in China, there is a price gap between the two markets. It means arbitrage is limited and there is heavy market segmentation in these markets. Capital market segmentation may obstruct the international investment, restrict the way of the corporation financing, disturb the companies' development, and postpone the corporations' internationalization. We can use the price behavior of the A+H cross-listed stocks to explore the form and the trend of the market segmentation to study the methods to avoid the segmentation.First, this paper uses some empirical methods to test the A and H markets indexes and A+ H cross-listed stocks, such as: the Johansen Cointegration Tests, Granger Causality Tests, Variance Decompositions, and Impluse Response. By this empirical research, I find there is segmentation between the Mainland and the Hong Kong markets. However, B shares has been opened to the mainland investors while H-shares indexes has been introduced. Besides, the reform on equity segmentation has been taken off. All these actions enhanced the correlation between the A-shares market and H-shares market. At the same time, both markets contribute to price discovery, but the depth of the effect is different after the reform on the equity segmentation. The correlation of the two markets is adjusted gradually. And after the reform on the equity segmentation, the Granger Causality test seems more significant.Then we can estimate an error correction model (ECM) to study the behavior of the A+H cross-listed stocks. I find there are several shares which listed in the both market have certain correlation, and the correlation significantly enhanced. And price premium has occurred on several H-shares. It is different from the price discount of foreign shares called "the puzzle of the Chinese capital market". It also indicates that the correlation between the two markets is deeper and deeper.