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Individual investors' propensity to speculate and A-share premiums in China's A-shares and H-shares

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  • Chen, Jun
  • Tian, Gaoliang
  • Yang, Fan

Abstract

We explore factors that contribute to A-share premiums (ASPs) using a sample of 94 cross-listed Chinese firms. We construct proxies of individual investors' propensity to speculate to investigate the association between the speculative motivation and the ASP. This study finds results that are consistent with predictions of behavioral finance theory: When individual investors speculate on a clientele of A-shares, which are characterized by costly to arbitrage or whose issuing firms are attractive to speculative picks, this clientele of A-shares enjoys persistent higher ASPs than other cross-listed A-shares. This finding is robust after controlling for relevant factors reported by previous studies.

Suggested Citation

  • Chen, Jun & Tian, Gaoliang & Yang, Fan, 2020. "Individual investors' propensity to speculate and A-share premiums in China's A-shares and H-shares," Emerging Markets Review, Elsevier, vol. 43(C).
    • Handle: RePEc:eee:ememar:v:43:y:2020:i:c:s1566014119305229
    DOI: 10.1016/j.ememar.2020.100689
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    More about this item

    Keywords

    A-share; H-share; Equity price premium; Equity market in China; Behavioral finance; Speculation hypothesis;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G40 - Financial Economics - - Behavioral Finance - - - General

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