Empirical Study On Factors Of A-Share Premium To H-Share Based On Market Segmentment

With the economic globalization and the development of science, the internal relation among the world's major capital markets is getting stronger and the stock market of China has also experienced a change from closed to open. July 15, 1993, Qingdao beer began Trading in the Hong Kong Stock Exchange as the first H-share listed companies of China. It marked China's capital market into the world financial system. After nearly eight years, there are 67 companies in both A-share and H-share, which become the communication link between China and the world. There has been a large premium between A-share and H-share, but recent years the situation is changing. The new research of the issue will give the government and the investors in both markets more information. The study will give some useful and meaningful suggestion, which will reduce the premium of A-share and H-share.This paper describes the situation of the premium between A-share and H-share, and analyzes the theoretical methods of market segmentation test. It also point out the factors that lead the different price between A-share and H-share. After comparing the test methods of market segmentation, the article will use Granger causality test to research the current situation of A-share and H-share market. The article will analyze the situation of market segmentation from both industry and the passage of time. The results show that the changing situation of A-share and H-share will not change the market segmentation. Meanwhile, after the test of market segmentation and the theoretical study, the article point out many explanatory variables and set up its Panel Data model. This paper chooses 4 January 2008 to December 31, 2010 as its sample, and analyzes the 51 listed companies in both A-share and H-share market. The explanatory variables include total share capital, earnings per share and net assets per share. The results support the demand elasticity hypothesis, the risk premium hypothesis and that he differences investment philosophy hypothesis. Finally, according to the research conclusions of chapters III and IV, the article points out the suggestion for both government and the investors.