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On the relationship between sentiment gap and A-share premium in China

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  • Fu, Hsiao-Peng
  • Hua, Wei

Abstract

In this study, we find that the lagged sentiment gap between the A and B share markets in China inversely predicts the price premium of A-shares over B-shares. We also discover a positive concurrent relationship, implying that the sentiment gap drives the premium. More importantly, the premium itself not only conversely forecasts future market returns for boards comprising 64% of all stocks but also shows a positive concurrent relationship, fulfilling the role of a sentiment proxy. Finding the role enriches the importance of the premium since prior research focuses solely on its rationales.

Suggested Citation

  • Fu, Hsiao-Peng & Hua, Wei, 2023. "On the relationship between sentiment gap and A-share premium in China," Finance Research Letters, Elsevier, vol. 58(PB).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323007080
    DOI: 10.1016/j.frl.2023.104336
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    References listed on IDEAS

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    More about this item

    Keywords

    A-share premium; Investor sentiment; Retail investors; Chinese stock market;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G19 - Financial Economics - - General Financial Markets - - - Other

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