A Comparative Study On Cross-border Investments Of Hong Kong Investors And Mainland Investors

Following the launch of the Shanghai-Hong Kong Stock Connect Scheme,Shanghai and Hong Kong investors can make cross-market investments.However,cross-market investments brings greater challenges to investors,and investors in Shanghai and Hong Kong may also show different investment behaviors in cross-market investments due to differences in investment capabilities.This article compares the behavior of investors in the two places from three aspects: stock investment performance,stock investment preferences and the causes of the differences.Firstly,this article uses the data of the shareholding ratio of Shanghai-Hong Kong Stock Connect stocks to simulate the cross-market investment performance of investors in the two places.This article constructs investment portfolios for stocks with different shareholding ratios in the Shanghai and Hong Kong stock markets.If investors make the good stock selection strategy,then the stocks with higher investor holdings should have higher investment returns in the next stage.This article follows the stock selection strategies of Hong Kong and Shanghai investors to construct investment portfolios.This article finds that in cross-market investment,the performance of asset portfolios constructed following mainland investors’ stock selection is worse,while that of asset portfolios built with Hong Kong investors’ stock selection is better.Secondly,after grouping stocks with different shareholding ratios,this article analyzes the investment preferences of investors in the two places from multiple indicators.This study finds that mainland investors have higher shareholdings in stocks with small market capitalization,low market price-to-book ratio,higher beta coefficient,higher leverage ratio,and worse performance of investment indicators,such as average rate of return.The stocks that Hong Kong investors have higher shareholdings are those with larger market value,higher price-to-book ratio,lower book leverage ratio,and better investment indicators.Mainland investors are inclined to invest in A + H shares,while Hong Kong investors are not inclined to invest in A + H shares.In addition,Hong Kong investors and mainland investors are inclined to invest in the pharmaceutical and biological industry.Hong Kong investors are not inclined to invest in heavy industry,while mainland investors are not inclined to invest in light industry.Finally,this article studies the causes of the differences in investor investment behaviors between the two places.This article explains the differences in investor investment behavior from the perspective of local bias.This article analyzes whether investors in the two places are affected by local bias in cross-market investments.This article uses the market index as a proxy for the local stock market.This article uses the Shanghai Composite Index and the Hang Seng Index for Mainland and Hong Kong investors,respectively.This article analyzes the correlation between the local market index and the returns of stocks invested by investors from two places.This article finds that mainland investors are affected by local bias,while Hong Kong investors have not been affected by the local stock market.This article studies the cross-market investment behavior differences between investors in the two places under the Shanghai-Hong Kong Stock Connect Scheme.The research results can help investors optimize cross-market investment decisions,make rational cross-market investments,and provide empirical evidence for investor education.