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The speed of adjustment to information: Evidence from the Chinese stock market

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  • Chiang, Thomas C.
  • Nelling, Edward
  • Tan, Lin

Abstract

This paper examines the speed of price adjustment in Chinese A- and B-share stock markets. We use a VAR model to show that A-shares, which are owned primarily by domestic individual investors, adjust to information faster than do B-shares, which are owned primarily by foreign institutional investors. Our analysis of firm characteristics suggests that the speed of stock price adjustment for A-shares is related to earnings per share, while that for B-shares is related to firm size. We also find that A-shares react more quickly to bad news, while B-shares react more quickly to good news. The difference in the speed of adjustment between A- and B-shares decreased following the liberalization of financial policy in February 2001, which allowed domestic investors to purchase B-shares.

Suggested Citation

  • Chiang, Thomas C. & Nelling, Edward & Tan, Lin, 2008. "The speed of adjustment to information: Evidence from the Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 17(2), pages 216-229.
  • Handle: RePEc:eee:reveco:v:17:y:2008:i:2:p:216-229
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    References listed on IDEAS

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    Cited by:

    1. Weber, Enzo & Zhang, Yanqun, 2012. "Common influences, spillover and integration in Chinese stock markets," Journal of Empirical Finance, Elsevier, vol. 19(3), pages 382-394.
    2. He, Yan & Wang, Junbo & Wu, Chunchi, 2013. "Domestic versus foreign equity shares: Which are more costly to trade in the Chinese market?," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 465-481.
    3. Cheng, Louis T.W. & Leung, T.Y. & Yu, Wayne, 2014. "Information arrival, changes in R-square and pricing asymmetry of corporate news," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 67-81.
    4. Li, Johnny Siu-Hang & Ng, Andrew C.Y. & Chan, Wai-Sum, 2015. "Managing financial risk in Chinese stock markets: Option pricing and modeling under a multivariate threshold autoregression," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 217-230.
    5. Yao, Juan & Ma, Chuanchan & He, William Peng, 2014. "Investor herding behaviour of Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 12-29.
    6. repec:eee:intfin:v:50:y:2017:i:c:p:182-203 is not listed on IDEAS
    7. Hsu, Pao-Peng & Liao, Szu-Lang, 2012. "The portfolio strategy and hedging: A spectrum perspective on mean–variance theory," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 129-140.

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