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Domestic versus foreign equity shares: Which are more costly to trade in the Chinese market?

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  • He, Yan
  • Wang, Junbo
  • Wu, Chunchi

Abstract

This paper investigates the transaction costs of the domestic and foreign shares in the Chinese market after the 2001 reform. We find that the higher transaction costs of foreign shares (vs. domestic shares) on the Shanghai Stock Exchange are attributable to their less active trading activities, higher volatility of trade-by-trade price returns, higher probability of information-based trading, and bigger relative tick for quoted prices. In contrast, the lower transaction costs of foreign shares (vs. domestic shares) on the Shenzhen Stock Exchange are mainly due to their lower degree of discreteness for quoted prices.

Suggested Citation

  • He, Yan & Wang, Junbo & Wu, Chunchi, 2013. "Domestic versus foreign equity shares: Which are more costly to trade in the Chinese market?," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 465-481.
    • Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:465-481
    DOI: 10.1016/j.iref.2013.01.002
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    Cited by:

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    3. Ho, Tsung-wu & Chang, Shu-Hwa, 2015. "The pricing of liquidity risk on the Shanghai stock market," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 112-130.

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    More about this item

    Keywords

    Transaction cost; Bid–ask spread; Price discreteness; Chinese stock markets;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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