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Integrating A- and B-Share Markets in China: The Effects of Regulatory Policy Changes on Market Efficiency

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  • Changjiang Lu

    ()
    (Fudan University, School of Management, 670 Guoshun Road, Shanghai, 200433, P.R. China)

  • Kemin Wang

    ()
    (Fudan University, School of Management, 670 Guoshun Road, Shanghai, 200433, P.R. China)

  • Haiwei Chen

    ()
    (California State University, San Bernardino, Department of Accounting and Finance, 5500 University Parkway, San Bernardino, CA 92407-2397, USA)

  • James Chong

    ()
    (California State University, Northridge, Department of Finance, Real Estate, and Insurance, 18111 Nordhoff Street, Northridge, CA 91330-8379, USA)

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    Abstract

    We investigate the effectiveness of two recent regulatory policy changes on market efficiency in the Chinese A- and B-share markets. Overall, the opening of the B-share market to domestic Chinese investors and the limited opening of the A-share market to foreign investors increase market efficiency. The opening of the B-share market significantly reduces the price differential between A- and B-shares. Furthermore, there is no longer feedback in returns between the two markets in recent years. Our results provide evidence that there is no detrimental effect to market efficiency by integrating Chinese investors to international markets and foreign investors to the Chinese stock markets.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.

    Volume (Year): 10 (2007)
    Issue (Month): 03 ()
    Pages: 309-328

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    Handle: RePEc:wsi:rpbfmp:v:10:y:2007:i:03:p:309-328

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    Related research

    Keywords: China B-shares; market efficiency; GARCH; market integration;

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    Cited by:
    1. Hung, Jui-Cheng, 2009. "Deregulation and liberalization of the Chinese stock market and the improvement of market efficiency," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 843-857, August.

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