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China's Securities Market, The B-share Price Differences In Empirical Research

Posted on:2005-05-02Degree:MasterType:Thesis
Country:ChinaCandidate:X L ZhangFull Text:PDF
GTID:2206360122986051Subject:Finance
Abstract/Summary:PDF Full Text Request
Foreign class shares, such as Chinese B-shares, that can only be owned by foreign investors are common in the emerging markets. In most of these markets, the foreign class shares typically sell at a premium relative to the domestic class shares that can only be owned by the domestic investors. In contrast to these markets, the Chinese foreign class B-shares are traded at a discount relative to the domestic class A-shares.Combined with other scholars' research, I draw the conclusion that four main factors result in Chinese B-shares discount. They are information asymmetry, differential liquidity, differential investment ideas and differential demand. I bring forward a new explanation for B-shares discount. I think differential demand elasticity between domestic and foreign investors, especially the lower demand elasticity of domestic investors, is an important factor that affects the difference between A and B shares. In my dissertation, I exert the quantitative and qualitative methods to testify the above explanations under the event that B-shares market's open to domestic investors on Feb. 19th, 2001. By means of linear regression and paired-sample equality test of means and deviation, I find that hypothesis of differential demand and differential liquidity can explain the price difference between A-shares and B-shares. Noticeably, the outcome from the quantitative analysis also proves the hypothesis on the differential demand elasticity. The actual price discrimination imposed on domestic investors and lower demand elasticity induced by political arrangement is essential to explain the price difference (B-shares discount) in Chinese stock market.
Keywords/Search Tags:China', s
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