Study Of Spillover Effect Of Chinese Companies Cross Listed In Us And Hong Kong

The study is focused on return transmission of cross-border listed companies across different markets, which is also known as spillover effects, as well as the mechanism of the spillover effects. Subject of the study is China’s US-listed companies which are also listed in HK market.The study proposed5hypotheses at first place. The first one is that spillover effect between US and HK stock market exists. The second one is that there is significant direction of the spillover effect. The third one is that momentum effect exists. The forth one is that the strength of spillover effect is positive related with the degree of information asymmetry. The fifth one is that investors in HK market is more speculative compared with investors in US market.Methodology of the study is LMS W model and2-step regression analysis. The first step is cross time series analysis of local market stock return and oversea market stock return in order to analyze the strength of spillover effect and the direction, eliminating the systematic fluctuation. The second step is cross-section data analysis, making regression of spillover effect coefficient from first step on information asymmetry proxy variable, to further study the relationship between spillover effect and information asymmetry.By modeling and empirical study, I get a serial of results which demonstrating that the spillover effect has its major direction, which, in this study, is from US to home, and the spillover effect has relationship with the degree of information asymmetry, to be specific, which is that the less asymmetric the information is, the greater the spillover effect is.The conclusion has important implication for companies which are already listed both oversea and locally, as well as for the companies which are considering cross listing. The disadvantage of cross listing is the fluctuation of stock price will be more violent because of existence of spillover effect, and it’s more difficult for companies to take control of their market value. And cross listing will bring additional costs, for example, additional cost for complying different regulation systems, operating cost from difference of accounting policies, cost from difference of information disclosure and additional cost to satisfy different needs of different investors, etc.