Research On The Factors Affecting Stock Price Disparity Of A-share And H-share

The phenomenon that the stock price of dual-listing company of A-share and H-share varys from different markets has existed in the capital market of our country for a long time. The reason of this phenomenon lies in the segemantation of the two markets. In order to change the situation of the market segementation and promote the capital flow to pass through the capital markets of both sides, the authorities of the two-sides launched the Shanghai-Hong Kong Stock Connect program. At the same time, the Shenzhen-Hong Kong Stock Connect program is in the pipeline. This article aims to study the impsct that the Shanghai-Hong Kong Stock Connect program has on the market segementation and the on A-share and H-share price difference. This study is not only helpful to test the effect of the Shanghai-Hong Kong Stock Connect program, but also an enlightenment to the Shenzhen-Hong Kong Stock Connect program.First of all, we conduct a market segmentation test of A-share and H-share markets through Granger causality test. We find that A-share and H-share markets were in complete segmentation before the Shanghai-Hong Kong Stock Connect program was approved. Though the market segementation was reduced after the programme’s being approved, the two markets came to segementation when the Shanghai-Hong Kong Stock Connect program began.Then this article tests the factors which result in the price difference between Aand H-share of Chinese dual-listing companies and analyses the effect of the Shanghai-Hong Kong Stock Connect program based on dynamic panel data model. Because of the existence of the lagged terms of explanatory variables in the model, the traditional estimation methods will lead to estimation error. This paper uses the System GMM estimation, which makes the conclusions more reliable. The result of empirical study shows that the Differential Risk Hypothesis and the Liquidity Hypothesis can explain the price difference better. The change in the return of Shanghai and Hong Kong stock market may influence the price difference evidently.After Shanghai-Hong Kong Stock Connect program began, the price difference became larger.Finally, according to the result of empirical research and the situation of A-share and H-shares market, related suggestions are put forward, such as further improving the Shanghai-Hong Kong Stock Connect program and accelerating the start of Shenzhen-Hong Kong Stock Connect program, guiding A-share investors to invest rationally, speeding up financial innovation and establishing arbitrage mechanism.