Structural breaks, cointegration and B share discount in Chinese stock market

Dayong Zhang, David Dickinson and Marco Barassi

MPRA Paper from University Library of Munich, Germany

Abstract: The Chinese Stock market had a special feature up to 2001 in that the stocks trading was segmented according to the type of investor (domestic and foreign). Since companies can issue both A shares (for domestic residents) and B shares (foreign investors) and the legal status of these shares are the same, they would be expected to have similar fundamental expected dividend flows. If discount rates are fixed this should imply that the share prices will be cointegrated. We test this proposition and find that there is no evidence for a long-run relationship for the time period under investigation. Then we show there are two structural breaks, corresponding to the regulatory shift in 2001 and the Asian financial crisis. After correcting for these structural breaks, we identify long run relationships and consider reasons for why such a relationship exists. By doing so we are able to throw some light on why there is a significant discount on B shares relative to the same share traded in the A market.

Keywords: Chinese stock market; Cointegration; Structure break; B share discount. (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/70353/1/MPRA_paper_70353.pdf original version (application/pdf)

Related works:
Working Paper: Structural Breaks, Cointegration and the B Share Discount in Chinese Stock Market (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:70353

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().