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

Hsiao-Peng Fu and Wei Hua

Finance Research Letters, 2023, vol. 58, issue PB

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.

Keywords: A-share premium; Investor sentiment; Retail investors; Chinese stock market (search for similar items in EconPapers)
JEL-codes: G10 G11 G19 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323007080

DOI: 10.1016/j.frl.2023.104336

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