The Information Transmission And Volatility Spillover Effects Of Dual-listed A Shares And H Shares

Various countries of the world capital markets are linked more closely with the development of global economic integration. And the capital market is gradually moving towards internationalization. In recent years, China’s capital market is gradually moving towards the world with the entry of a large number of institutional investors. However, financial market segmentation still persists. And stock market segmentation is a very important one. At the same time it is also a hot topic of many academic researches. In the current, dual listed companies exhibit different prices for the same stock. Dual-listed stocks in the two markets issued by the same company, face with the same background, have the same dividend and voting rights and they should bear the same company risk. The two stock markets should make the same or similar fluctuations reaction if Information reaches the two markets at the same time. However, because many institutional differences between the two stock markets, capital flow restrictions, as well as market microstructure differences, the same assets are inconsistent in different market prices. Many scholars at home and abroad have been depth study of this phenomenon. But they missed a more important issue which is the transmission of information between the market and the volatility spillovers. Volatility spillovers between financial markets refers to a financial market or financial assets will not only by its own impact, but also by the other financial markets or capital, This market fluctuations conduction is defined as a "spillover effect". The volatility of the stock price is hidden many macroeconomic changes in market information, as well as a single company. Research of information transfer and volatility spillovers is helpful to analyze the linkage relationship between the market and lead-lag relationship. In turn, it can provide a very important investment for the market, investors and regulatory authorities and policy-making reference for.In China, the general will be listed in the Mainland and Hong Kong listed companies in the Mainland stock are called A shares and H shares. Since July1993, Tsingtao Brewery is listed on the Hong Kong stock market, August27of the same year, and the issue of A shares returned to the Mainland A-share market. More and more companies follow their listing and financing channels. Especially after2001, with the mainland of China and Hong Kong dual listing policy relaxation, many mainland companies listed in Hong Kong stocks are successively returned to the A-share market. However, a lot of H-shares return to A shares after listing with performance not good. In recent years, the dual listing of the shares of mainland companies in China with widespread concern related to academic researchers.The research of the Information transmission mechanism between dual listed companies in the stock market and the volatility spillovers can help investors to determine the stock market trend, government departments to take appropriate measures and help regulators to improve market supervision and prevent financial risks. Therefore, this paper bases on the financial market microstructure theory perspective and information theory, make theoretical and empirical research on the stock market of China’s A-share and H-share market price discovery, information transfer and cross-market volatility spillovers. The structure of this paper is as follows.The research structure of the paper is as follows.The first part is introduction. Mainly expounds the research background, purpose and significance of this paper. Then briefly introduced the main content,method and the innovation of this paper.The second part is the literature review. This paper introduced the market information transmission and the volatility spillover effect whis is researched by domestic and foreign scholars.Generally speaking, in terms of research subjects, most foreign scholars studied the risk contagion phenomenon among Hongkong, London, New York, Japan and Singapore and other major international stock market; when speaking of domestic scholars,most of them studied the mechanism of information transmission between China’s A shares and B shares stock market,except a small part of scholars studied the volatility spillover effect among countries as well as A shares and H shares. When it comes to model, in general,the domestic and foreign scholars usually used are VAR model, VECM model, Grainger causality test, univariate and multivariate GARCH model.The third part of this paper present the relevant theories. For the market information transmission and the volatility spillover effect phenomenon, there are many theories in the world. This paper mainly illustrates several theories which are very popular in the world.The theories are market segmentation, market contagion theory, price theory and market linkage theory.The fourth part introduced the correlation test and models which are applied in this paper.The test method and model used in this article are:ADF unit root test, cointegration test, information share model, BEKK-GARCH model and seemingly unrelated regression model.The fifth part is the empirical part of this article. First of all, in the pretreatment of sample data set, we need the sample data set to be stable, in order to ensure the accuracy and reliability of the results of subsequent empirical.The ADF test used in this paper to test the stability of the sample data. The test results show that all the stock data set are Integrated of order one.Then this paper used EG two step method to test between A shares and H shares of the corresponding cointegration relationship.The test results show that there is no cointegration relationship between AHA and AHH index, while there exists cointegration relationship between all individual mainland A shares and H shares of the corresponding stock. Then the paper seperately applied the information share model, Grainger causality test, BEKK-GARCH model and seemingly unrelated regression model to examine the information transmission and the volatility spillover effect between the two markets.The results of the information share model showed that the A share market price discovery slightly ahead of the H shares, A shares market price guide the H-share market price.However,according to the analysis from the Grainger causality test and BEKK-GARCH model to the market index, in addition to the analysis of the two stock market data using the seemingly unrelated regression, we can concluded that dual listed shares, A shares and H shares present a bidirectional volatility spillover effect.In the sixth part,combined with the theory of the third part,this paper analyzed the empirical results.First of all, combined with the theory of asymmetric information, we can conclude that relative to foreign investors, domestic investors have more advantages on language, geographical and cultural, so they can get the listing Corporation information more easily and more accurately. Secondly, combined with the price discovery theory, we concluded that with the gradual opening up of China’s capital market, as well as the stock index futures and margin trading business applied, the mainland stock market has beem more and more mature.In addition, plus the development of domestic investment institutions QDII,the inland market abnormal fluctuation has been reduced and the price discovery efficiency has improved steadily,promoting the market related information transfer from A shares to H shares market.The seventh part presents the conclusion of this thesis, and some related policies and suggestions for investors and the government brought. Finally, combined with the actual situation of this study, research limitations are summarized in this paper, and put forward suggestions for future research direction and the contents of this paper.The innovation of this paper is mainly reflected in two aspects,the object and method of research(1) Innovation of the angle of researchMost of the past literature had focuse on the stock different price causes and the influencing factors of the cross-listed stocks,only several scholars studied the volatility spillover effect of the cross-listed markets.However,these scholars had not studied the mechanism of information transmission between the A shares and H shares markets.Most of these literature had focused on the spillover effect among A shares,B shares markets,The New York shares markets and so on.When measuring the risk of A shares and H shares market,this paper chose the Insex AHA and AHH which are representative and can reflect the difference of the markets more easily.(2) the innovation of research methodIn order to study the volatility spillover between multiple groups of return series, based on the previous research, this paper chose the multivariate GARCH model which is current popular in the world. Compared with the vector error of VAR model, the traditional practice model and the univariate GARCH model,the multivariate vector GARCH model which include the information of the variance-covariance matrix of the residual vector can study the information transmission mechanism of return series more accurately. Secondly, this paper also introduced the Lau.S.T (1994) seemingly unrelated regression SUR model using stock data to study the volatility spillover effect between AH shares markets. Seemingly unrelated regression method is also called Zellner method. It is assumed that there are only prerequisite variables on the right hand side of the equations,and the equations are all correlated,which can be completely reflected by the residuals.However, in view of the form, equations seem to be not related. When there is a correlation between the equations, the seemingly unrelated regression can account for the system factors.In addition,the standard deviation which is estimated by the model is much smaller then the deviation estimated by the single equation, so it is more efficient than the single equation estimation.