The value of information in China’s connected market

Keqi Chen, Yuehan Wang and Xiaoquan Zhu

Journal of Empirical Finance, 2024, vol. 78, issue C

Abstract: The paper studies the role of information in cross-border trading by using the Stock Connect as a novel laboratory. We present evidence that northbound investors have an additional informational advantage over domestic institutional investors regarding firm fundamentals. A long-short strategy earns an average weekly return of 0.34% after adjusting for the Chinese three-factor model. Furthermore, the information advantage of northbound investors is likely to work to a greater effect in asymmetric information environments. Additionally, northbound flows are useful in explaining the subsequent trading activities of domestic investors, which becomes more salient over time and among firms experiencing more attention-induced copycat trading.

Keywords: Copycats; Cross-border flows; Informed trading; Stock Connect (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:78:y:2024:i:c:s0927539824000616

DOI: 10.1016/j.jempfin.2024.101526

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