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Price Discovery for Segmented US-Listed Chinese Stocks: Location or Market Quality?

K.C. Chen, Guangzhong Li and Lifan Wu

Journal of Business Finance & Accounting, 2010, vol. 37, issue 1-2, 242-269

Abstract: This study extends the cross-listing literature by examining how, and to what extent, the trading of cross-listed China-backed ADRs on the New York Stock Exchange contributes to information flows and price discovery for the corresponding stocks traded in China's A-share market. We find that the cross-listed US prices and Chinese prices are not cointegrated in the long-run and the home market plays a far more important role in both price discovery and volatility spillover than does the US market. The home bias hypothesis still holds for the segmented Chinese A-share market and the location where price discovery actually originates is the essential factor in the process of international information transmission. Copyright (c) 2009 The Authors Journal compilation (c) 2009 Blackwell Publishing Ltd.

Date: 2010
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