Research On The Impact Of Shenzhen-hong Kong Stock Connect On AH Share Price Difference

Since the official introduction of the Qualified Foreign Institutional Investor(QFII)system in 2002,China’s capital market has been open for more than 10 years.With the official launch of Shenzhen-Hong Kong Stock Connect in 2016,the opening of China’s capital market has taken an important step.However,due to differences in investment environment,investment subjects,investment concepts and capital flow restrictions between the mainland and Hong Kong,the one-price law has been broken with the different stock prices between A-share and H-share of the same listed company.The A-share price is generally higher than the H-share price,and this phenomenon is particularly obvious in China.In order to study the impact of Shenzhen-Hong Kong Stock Connect on AH share price difference,this paper firstly teased out the relevant background and theoretical basis,and described the current situation of Shenzhen-Hong Kong Stock Connect and AH shares in detail.Secondly,this paper took the official opening of Shenzhen-Hong Kong Stock Connect on December 5,2016 as the time boundary.According to the variation of the price differences of 60 AH dual-listed companies in each year before and after the opening of Shenzhen-Hong Kong Stock Connect,the comprehensive feasible generalized least squares estimation method,namely comprehensive FGLS was used to conduct an empirical research.This paper analysed from the traditional four hypotheses and gradually built the model.According to the characteristics of the sample stocks,the sub-sample researches were conducted in different listed locations and industries.The empirical results showed that the opening of Shenzhen-Hong Kong Stock Connect significantly decreased the AH share price difference.In the four hypotheses of market segmentation,only the risk preference difference hypo thesis was not significant,and the liquidity difference hypothesis,the information asymmetry hypothesis and the demand elasticity difference hypothesis can explain the existence of AH share price difference.The performance of the mainland stock market was positively correlated with the AH share price difference,while the Hong Kong stock market performance was significantly negative-correlated,and the higher institutional investor ratio and better corporate governance can decrease AH share price difference.After controlling all the traditional hypotheses factors,mainland and Hong Kong stock market factors,investor structure and corporate governance f actors,the opening of the Connect can significantly decrease the AH share price difference by 6.45%.The results of the interaction between the four hypotheses and policy variables indicate d that the information asymmetry hypothesis had a greater impact after the opening of Shenzhen-Hong Kong Stock Connect.The subsample test results showed that the opening of Shenzhen-Hong Kong Stock Connect had a greater effect on the AH share price difference between Shenzhen and Hong Kong’s dual-listed companies,which was related to the investment targets of Shenzhen-Hong Kong Stock Connect;the industry subsample test results showed that Shenzhen-Hong Kong Stock Connect to a greater extent lowerd the stock share price difference of manufacturing companies.Finally,based on the results of theoretical and empirical analysis,this paper proposed some policy recommendations.Such as promoting China’s stock market from speculation to investment,improving information disclosure system and corporate governance structure,steadily promoting capital market opening,and strengthening risk prevention and market supervision.