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

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  • Jianping Mei
  • Jose Scheinkman
  • Wei Xiong

Abstract

The market dynamics of technology stocks in the late nineties has stimulated a growing body of theories that analyze the joint effects of short-sales constraints and heterogeneous beliefs on stock prices and trading volume. This paper examines implications of these theories using a unique data sample from China, 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 motive can help explain a significant fraction of the price difference between the dual-class shares.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11362.

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Date of creation: May 2005
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Publication status: published as 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:nbr:nberwo:11362

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