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

  • Jianping Mei

    (Cheung Kong Graduate School of Business)

  • Jose A. Scheinkman

    (Department of Economics, Princeton University)

  • Wei Xiong

    (Department of Economics, Princeton University)

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.

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Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 504.

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Length: 31 pages
Date of creation: Nov 2009
Date of revision:
Publication status: Published in Annals of Economics and Finance, Society for AEF, vol. 10(2), pages 225-255, November 2009.
Handle: RePEc:cuf:wpaper:504
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