Capital Control, Market Segmentation and Cross-Border Flow of Information: Some Empirical Evidence from the Chinese Stock Market
30 Pages Posted: 20 Sep 2001 Last revised: 28 Dec 2007
Abstract
This paper investigates the trading activities of two distinct classes of shareholders, namely, the Chinese domestic investors and the foreign investors in the segmented Chinese A-share and B-share markets, respectively. Based on the results of our event study, we document prominent volatility and trading volumes during the windows of earnings announcements. The market reaction is more intensive in the A-share market and takes place much earlier before the public release of information. Furthermore, the abnormal trading volumes without price changes in advance of the public disclosure support the hypothesis of existing information among the A-share investors. This manifests information leakage and suggests an informal information environment in the A-share market. We further classify the earnings announcements into good news and bad news, and find that different information does not bring about different reaction patterns for the A shares. Insider trading, speculation and over-optimistic prospects for the economy in the A-share market are possible explanations.
Keywords: Market segmentation, earnings announcements, Chinese A-share stock market, Chinese B-share stock market
JEL Classification: G12, G14, G15, M41, N25
Suggested Citation: Suggested Citation
Do you want regular updates from SSRN on Twitter?
Recommended Papers
-
Why is There a Home Bias? An Analysis of Foreign Portfolio Equity Ownership in Japan
By Jun-koo Kang and René M. Stulz
-
By Gur Huberman
-
Home Bias and the High Turnover
By Linda L. Tesar and Ingrid M. Werner
-
The Determinants of Cross-Border Equity Flows
By Richard Portes and Hélène Rey
-
Corporate Governance and the Home Bias
By Lee Pinkowitz, Rohan Williamson, ...
-
The Determinants of Cross-Border Equity Flows
By Richard Portes and Hélène Rey
-
The Portfolio Flows of International Investors, I
By Kenneth Froot, Paul G.j. O'connell, ...
-
The Information Content of International Portfolio Flows
By Kenneth Froot and Tarun Ramadorai
-
The Information Content of International Portfolio Flows
By Kenneth Froot and Tarun Ramadorai