How do foreign investors affect China’s stock return volatility? Evidence from the Shanghai-Hong Kong Stock Connect Program

Weihua Chen, Rogemar Mamon, Heng Xiong and Pingping Zeng

Asia-Pacific Journal of Accounting & Economics, 2024, vol. 31, issue 1, 1-24

Abstract: This paper examines the influence of foreign investors on the stock return volatility via the Shanghai- Hong Kong Stock Connect Program (SHSCP). By analysing portfolios’ characteristics and utilising the Fama-Macbeth regression, we find that investing in China’s mainland stock market via the SHSCP could tame the stock return volatility. The results remain significant after taking into account endogenous factors and performing several robustness tests. Our findings support the rationale for opening up China’s capital market.

Date: 2024
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DOI: 10.1080/16081625.2022.2156360

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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