Chinese Stock Market Company Stock Small Company Stock Returns Between The Empirical Research

Asymmetric theories predict that information will flow from large stock prices to small stock prices, which may result in some relationship between large stock and small stock returns. The differential information hypothesis advanced by Atiase (1980 and 1985) postulates that the costs of information research are fixed and constant across firm size and information production increases with firm size. Freeman (1987) advanced three elements that offset the higher search cost associated with large firms' complexity which rationalizes the assumption. Then the movement of small stock prices will be leaded by that of large stock for all the time.An alternative view has been advanced by Hodgson, Masih and Masih (1999) . They argue that the incentives to undertake information search about small firms are asymmetric, because, while the cost of information search maybe constant, the potential payoff structure will change, they note that, if prices are noisy, do not adjust instantaneously, and information search is a cost-benefit tradeoff between costs and expected returns. Then the incentive to undertake information search will be related to the contemporaneous trading phase of the market (bull or bear market) . Accordingly, they postulate that .during optimistic periods in the stock market the high cost of information search for small firms maybe outweighed by potential high profits for identifying and investing in small stocks. Therefore it is predicted that information flows from small stock prices to large stock prices during bull market periods. Namely, the price movements of large stocks are led by small stock prices.This paper firstly gives some countries' empirical studies on the relationship between large stock and small stock returns, 1 select ten large stocks and ten small stocks from A share of Shanghai stock market of China, then, firstly analyze the prices movement of large stocks and small stocks using unit root test , cointegration test , which find they are all unit root ,but not cointegration. Afterward I investigate the lead-lag relationship between the large and small...