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Ownership Restrictions and Stock Prices: Evidence from Chinese Markets

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  • Su, Dongwei

Abstract

In this paper, I test a one-period capital asset pricing model (CAPM) under share ownership restrictions to explain differences in prices and expected excess returns between the classes of shares that can be bought and traded by domestic and foreign investors, respectively, in the Chinese stock markets. I find that cross-sectional variability in the spread between the expected domestic and foreign share excess returns is related to differences in individual shares' market betas. The empirical results are by and large consistent with the CAPM. After the betas are controlled for, idiosyncratic variance and firm size have no effect. Copyright 1999 by MIT Press.

Suggested Citation

  • Su, Dongwei, 1999. "Ownership Restrictions and Stock Prices: Evidence from Chinese Markets," The Financial Review, Eastern Finance Association, vol. 34(2), pages 37-56, May.
  • Handle: RePEc:bla:finrev:v:34:y:1999:i:2:p:37-56
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    Citations

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    Cited by:

    1. Su, Dongwei & Fleisher, Belton M., 1999. "Why does return volatility differ in Chinese stock markets?," Pacific-Basin Finance Journal, Elsevier, vol. 7(5), pages 557-586, December.
    2. Zhu, Jie, 2009. "Testing for expected return and market price of risk in Chinese A and B share markets: A geometric Brownian motion and multivariate GARCH model approach," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(8), pages 2633-2653.
    3. Chung, Shifei & Wei, Peihwang, 2005. "The relationship between bid-ask spreads and holding periods: The case of Chinese A and B shares," Global Finance Journal, Elsevier, vol. 15(3), pages 239-249, February.
    4. Wang, Yuenan & Iorio, Amalia Di, 2007. "Are the China-related stock markets segmented with both world and regional stock markets?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(3), pages 277-290, July.
    5. Dongwei Su, 2000. "Asset Pricing in A Segmented Emerging Market," Journal of Applied Economics, Universidad del CEMA, vol. 3, pages 387-412, November.
    6. Yang, Ting & Lau, Sie Ting, 2005. "U.S. cross-listing and China's B-share discount," Journal of Multinational Financial Management, Elsevier, vol. 15(4-5), pages 334-353, October.
    7. Yuenan Wang & Amalia Di Iorio, 2007. "The cross-sectional relationship between stock returns and domestic and global factors in the Chinese A-share market," Review of Quantitative Finance and Accounting, Springer, vol. 29(2), pages 181-203, August.
    8. Bai, Jushan & Ando, Tomohiro, 2013. "Multifactor asset pricing with a large number of observable risk factors and unobservable common and group-specific factors," MPRA Paper 52785, University Library of Munich, Germany, revised Dec 2013.
    9. repec:eee:quaeco:v:67:y:2018:i:c:p:297-310 is not listed on IDEAS
    10. Xiaoqing Eleanor Xu, 2005. "Performance of Securities Investment Funds in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(5), pages 28-42, October.
    11. He, Yan & Wu, Chunchi & Chen, Yea-Mow, 2003. "An explanation of the volatility disparity between the domestic and foreign shares in the Chinese stock markets," International Review of Economics & Finance, Elsevier, vol. 12(2), pages 171-186.
    12. Chan, Kam C. & Fung, Hung-Gay & Thapa, Samanta, 2007. "China financial research: A review and synthesis," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 416-428.
    13. Xiaoqing Eleanor Xu, 2005. "Performance of Securities Investment Funds in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(5), pages 28-42, October.
    14. Nikkinen, Jussi, 2003. "Impact of foreign ownership restrictions on stock return distributions: evidence from an option market," Journal of Multinational Financial Management, Elsevier, vol. 13(2), pages 141-159, April.

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