An Empirical Study On Investor Sentiment’ Effects On Price And Liquidity Of AH Cross-listed Companies

With the worldwide processing of economy development,that Chinese finance goes to world is unstoppable as well.Due to the advantages of same time zone,closing location and similar cultures,Hong Kong is the first choice for oversea financing among mainland companies.However,different prices between A-stock and H-stock of one enterprise have always been existing.So is the Chinese specific phenomenon that domestic shares premium foreign shares,known as The Misery of China Stock.This thesis use many different types of investor sentiment proxies based on behavioral finance view,in order to explain price difference between A-stock and H-stock of AH cross-listed companies and its liquidity problem,what have a certain meaning to theory development and practical significance.This thesis bases on monthly return and price of 61 AH cross-listed companies from 2003 to 2014 original datum samples,constructing market sentiment(MSENT)and firm sentiment(FSENT)to exploit its macro and micro effects.Given that the main trader of A-stock and H-stock is institution investor and individual investor,I divided market sentiment into institution investor sentiment(PSENT)and individual investor sentiment(ISENT),following the method of Baker et al.(2012)decompose market sentiment into global and local market sentiment.This paper mainly researches on two projects: Investor Sentiment’ effects on AH Cross-listed Company Stock Price and Investor Sentiment’ effects on AH Cross-listed Company Liquidity.The former one’s empirical results as follows:(1)Market sentiment and firm sentiment both have significant influence on AH cross-listed stock price,but the coefficient of firm sentiment is larger in A stock market.(2)All kinds of sentiment above are negatively predicting future return in H stock market,but just institution investor sentiment has the same error pricing revising effect rather than individual investor sentiment.(3)Market sentiment has strong impact on AH price difference,and institution investor sentiment is bigger than individual investor sentiment.(4)Firm sentiment is just contemporaneous risk of price difference cannot extend to be an intertemporal one.The latter one’s empirical results as follows:(1)The higher the sentiment the more liquid stock market is,even controlling its promotion effect on trade volume.But it exists in A stock only,H stock is opposite.(2)Market sentiment is more stably robust than firm sentiment in A stock,but H stock is contrary.(3)No matter market sentiment is high or low,the higher the firm sentiment the bigger the trading volume is always being established.As to market range,just institution investor sentiment has the same result.(4)In combination,institution investor sentiment,individual investor sentiment and firm sentiment all are positive relationship with stock liquidity,no matter how high or low the market sentiment is.The difference is institution investor sentiment and individual investor sentiment influence price impact mainly;firm sentiment is trading volume.Given that institution investor showed more similarity between A-stock and H-stock on rational degree and effects,pushing more preferential policies published which incentive institution investor participation in market transaction or promote rational specific investment philosophy.It’s a considering suggestion which the main trading investor of A-stock and H-stock is individual investor and institution investor ask for.