The speed of adjustment to information: Evidence from the Chinese stock market

Thomas Chiang (), Edward Nelling and Lin Tan

International Review of Economics & Finance, 2008, vol. 17, issue 2, 216-229

Abstract: This paper examines the speed of price adjustment in Chinese A- and B-share stock markets. We use a VAR model to show that A-shares, which are owned primarily by domestic individual investors, adjust to information faster than do B-shares, which are owned primarily by foreign institutional investors. Our analysis of firm characteristics suggests that the speed of stock price adjustment for A-shares is related to earnings per share, while that for B-shares is related to firm size. We also find that A-shares react more quickly to bad news, while B-shares react more quickly to good news. The difference in the speed of adjustment between A- and B-shares decreased following the liberalization of financial policy in February 2001, which allowed domestic investors to purchase B-shares.

Date: 2008
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:17:y:2008:i:2:p:216-229

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