The Research Of Price Discovery Between A Shares And H Shares Of The Chinese Dual-listing Companies

The issue that Chinese foreign stock has a much lower price than Chinese domestic stock has been for a long time,which possesses distinct Chinese characteristics.Information asymmetry is an important factor that influenting the price difference between Chinese foreign stock and Chinese domestic stock.Two viewpoints engender in researching the information asymmetry of the A-Bstocks and A-Hstocks.On the one hand ,domestic investos have more advantages of information than foreign investors,because of the difference of language,culture and accounting system.On the other hand,foreign investors ,who are proficient in the professional knowledge,capital strength,investment experience and the better source of getting the information that is not easy for domestic investors,have superior information over the domestic investors.Because of this background,this paper studies the information asymmetry of the A-H stock markets and the information transmission mechanisms.In order to get the new information about information asymmery of the Chinese capital market,this paper uses Permanent-Transitory model and Granger Causality Test to examine the daily closing prices of the 61 A-H dual-listing firms,focusing the price discovery of each firm,which is different from previous literatures using indexs of the markets.This paper adopts the Permanent-Transitory model to measure the relative size of price discovery in the A stock market and the H stock market toward the cointegration samples.For the non-cointegration ones,the paper employs the Granger Causality Test to qualitatively analyse the lead-lag relationship between the two markets. The empirical results show that A-share market is dominant in all the three sub-periods,which verifies the hypothesis that A stock market is dominant,also proves the results of Charkravarky et al (1998)that believe domestic investors have advantage of the information .In the same time ,H-share market is also found to play a important role in the price discovery ,which exihibits H share leads A share for some companies .