Explaining Share Price Disparity with Parameter Uncertainty: Evidence from Chinese A- and H-Shares
Ka Fai Li and
Additional contact information
Tsz-Kin Chung: Hong Kong Monetary Authority
Cho-Hoi Hui: Hong Kong Monetary Authority and Hong Kong Institute for Monetary Research
No 332011, Working Papers from Hong Kong Institute for Monetary Research
The price disparity between the dual-listed Chinese firms in the A- and H-share markets is one of the most intriguing puzzles in the Mainland and Hong Kong financial markets. In this paper, we revisit this price disparity puzzle using the channel of parameter uncertainty. In the presence of information asymmetry and market segmentation, investors have different views on a firm's asset volatility, and hence, different valuations of the same reference firm. We estimate a structural model for equity pricing using a Bayesian approach, in which investors' model-parameter uncertainty is represented by the posterior distributions of the firm's asset volatility. Our regression analysis shows that parameter uncertainty explains variation of the price disparity, in addition to other market-based and macro factors. We also find that parameter uncertainty is related to a firm's market-to-book ratio of equity, its age and size, and global risk appetite in the financial market.
Keywords: Market Segmentation; A and H Shares; Uncertainty (search for similar items in EconPapers)
JEL-codes: C11 G13 G32 (search for similar items in EconPapers)
Pages: 26 pages
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://www.hkimr.org/uploads/publication/47/ub_ful ... o-33_2011-final-.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Internal Server Error (http://www.hkimr.org/uploads/publication/47/ub_full_0_2_299_wp-no-33_2011-final-.pdf [301 Moved Permanently]--> http://www.aof.org.hk/research/HKIMR/uploads/publication/47/ub_full_0_2_299_wp-no-33_2011-final-.pdf [301 Moved Permanently]--> https://www.aof.org.hk/research/HKIMR/uploads/publication/47/ub_full_0_2_299_wp-no-33_2011-final-.pdf)
Journal Article: Explaining share price disparity with parameter uncertainty: Evidence from Chinese A- and H-shares (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hkm:wpaper:332011
Access Statistics for this paper
More papers in Working Papers from Hong Kong Institute for Monetary Research Contact information at EDIRC.
Bibliographic data for series maintained by HKIMR ().