Regulation Effects on Stock Returns in Shanghai and Shenzhen Exchanges

Haim Kedar-Levy (), Xiaoyan Yu (), Akiko Kamesaka () and Uri Ben-Zion ()
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Haim Kedar-Levy: Ben Gurion University of the Negev, and Ono Academic College, Postal: POB 653, Beer Sheva, 84105, Israel., http://cmsprod.bgu.ac.il/som/management/staff/HaimLevi.htm
Xiaoyan Yu: Ryukoku University
Akiko Kamesaka: Aoyama Gakuin University
Uri Ben-Zion: Ben Gurion University of the Negev

Journal of Financial Transformation, 2010, vol. 30, 133-139

Abstract: We compare changes of mean and variance of returns as two regulations have changed between 1992 and 2007 in the Chinese exchanges of Shanghai and Shenzhen. Specifically, we compare the implementation of a ±10% daily return limit vs. the absence of any limit, and the effect of allowing local and foreign investors to invest in both type-A and type-B stocks, vs. an earlier regimen of clear-cut segmentation. We find that while imposing the ±10% limit significantly reduced total daily variability, it increased the variability of opening returns in Shenzhen. Mean returns at the opening and throughout the trading session changed after the clienteles were merged, but not the total daily return, thereby improving market efficiency.

Keywords: Regulation; China; Clientele; Stock market; Efficiency (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1432

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