Integrating A- and B-Share Markets in China: The Effects of Regulatory Policy Changes on Market Efficiency

Changjiang Lu (), Kemin Wang (), Haiwei Chen () and James Chong ()
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Changjiang Lu: Fudan University, School of Management, 670 Guoshun Road, Shanghai, 200433, P.R. China
Kemin Wang: Fudan University, School of Management, 670 Guoshun Road, Shanghai, 200433, P.R. China
Haiwei Chen: California State University, San Bernardino, Department of Accounting and Finance, 5500 University Parkway, San Bernardino, CA 92407-2397, USA
James Chong: California State University, Northridge, Department of Finance, Real Estate, and Insurance, 18111 Nordhoff Street, Northridge, CA 91330-8379, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2007, vol. 10, issue 03, 309-328

Abstract: We investigate the effectiveness of two recent regulatory policy changes on market efficiency in the Chinese A- and B-share markets. Overall, the opening of the B-share market to domestic Chinese investors and the limited opening of the A-share market to foreign investors increase market efficiency. The opening of the B-share market significantly reduces the price differential between A- and B-shares. Furthermore, there is no longer feedback in returns between the two markets in recent years. Our results provide evidence that there is no detrimental effect to market efficiency by integrating Chinese investors to international markets and foreign investors to the Chinese stock markets.

Keywords: China B-shares; market efficiency; GARCH; market integration (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (10)

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DOI: 10.1142/S0219091507001082

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