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Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia

Author

Listed:
  • Jianping Mei

    (Cheung Kong Graduate School of Business)

  • Jose A. Scheinkman

    (Department of Economics, Princeton University)

  • Wei Xiong

    (Department of Economics, Princeton University)

Abstract

The market dynamics of technology stocks in the late 1990s have stimulated a growing body of theory that analyzes the joint effects of short-sales constraints and heterogeneous beliefs on stock prices and trading volume. This paper examines several implications of these theories using a unique data sample from a market with stringent short-sales constraints and perfectly segmented dual-class shares. The identical rights of the dual-class shares allow us to control for stock fundamentals. We find that trading caused by investors¡¯ speculative motives can help explain a significant fraction of the price difference between the dual-class shares.

Suggested Citation

  • Jianping Mei & Jose A. Scheinkman & Wei Xiong, 2009. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," Annals of Economics and Finance, Society for AEF, vol. 10(2), pages 225-255, November.
    • Handle: RePEc:cuf:journl:y:2009:v:10:i:2:p:225-255
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    More about this item

    Keywords

    Speculative bubble; Trading volume;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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