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Panel Cointegration of Chinese A and B Shares

Author

Listed:
  • Ahlgren, Niklas

    (Swedish School of Economics, Department of Finance)

  • Sjö, Bo

    (Swedish Agency for Development Evaluation)

  • Zhang, Jianhua

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

In this paper we study market segmentation and information flows in China’s stock markets. By using panel data methods we test for a unit root in the price premium of domestic investors' A shares over foreign investors’ B shares as well as cointegration between the prices of the A and B shares on the Shanghai and Shenzhen stock exchanges. We find that the A-share premia are nonstationary and the A- and B-share prices are not cointegrated up till January 2001. After February 2001, when domestic investors were allowed to trade B shares, the A-share premia become stationary and the A- and B-share prices cointegrated. Our findings suggest that the relaxation of the investment restrictions decreased the information asymmetry betwen the A- and B-share markets in China.

Suggested Citation

  • Ahlgren, Niklas & Sjö, Bo & Zhang, Jianhua, 2008. "Panel Cointegration of Chinese A and B Shares," Working Papers in Economics 300, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0300
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    File URL: http://hdl.handle.net/2077/9996
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    References listed on IDEAS

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    4. Maddala, G S & Wu, Shaowen, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
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    7. Jian Yang, 2003. "Market Segmentation and Information Asymmetry in Chinese Stock Markets: A VAR Analysis," The Financial Review, Eastern Finance Association, vol. 38(4), pages 591-609, November.
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    More about this item

    Keywords

    Chinese A and B shares; Market segmentation; Information flow; Panel unit root and cointegration tests;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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