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Market Linkage for Dual-Listed Chinese Stocks

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  • BILLY S.C. MAK
  • ASTA M.S. NGAI

Abstract

Only Chinese firms with the best financial integrity and corporate governance can be dually listed on the Hong Kong Exchange as H-shares or red chips and listed in the United States in the form of American Depository Receipts (ADRs). Dual listing for People's Republic of China (PRC) firms indicates their ability to attract international investors and to become international securities market participants. Using a bivariate generalized autoregressive conditional heteroscedasticity model, we examine patterns of information flows related to both pricing and volatility spillover across markets. Results indicate a significant mutual feedback of information between Hong Kong-listed stocks and ADRs. The Hong Kong market appears to play a more important role in influencing the pricing of corresponding companies in the U.S. market, whereas both markets are similarly influential to the volatility spillover. This finding is useful for foreign investment banking and financial services firms operating in China that need to understand the dual market performance of top PRC stocks.

Suggested Citation

  • Billy S.C. Mak & Asta M.S. Ngai, 2005. "Market Linkage for Dual-Listed Chinese Stocks," Chinese Economy, Taylor & Francis Journals, vol. 38(2), pages 88-107, March.
    • Handle: RePEc:mes:chinec:v:38:y:2005:i:2:p:88-107
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    Citations

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    Cited by:

    1. Chen, Mei-ping & Lee, Chien-Chiang & Hsu, Yi-Chung, 2011. "The impact of American depositary receipts on the Japanese index: Do industry effect and size effect matter?," Economic Modelling, Elsevier, vol. 28(1-2), pages 526-539, January.
    2. Cai, Charlie X. & McGuinness, Paul B. & Zhang, Qi, 2011. "The pricing dynamics of cross-listed securities: The case of Chinese A- and H-shares," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2123-2136, August.
    3. He, Hui & Yang, Jiawen, 2012. "Day and night returns of Chinese ADRs," Journal of Banking & Finance, Elsevier, vol. 36(10), pages 2795-2803.
    4. Muhammad Ahad & Ijaz ur Rehman & Fiza Qureshi & Waqas Hanif & Zaheer Anwer, 2018. "Modelling Asymmetric Impact of Home Country Macroeconomic Variables on American Depository Receipts: Evidence from Eurozone," Annals of Economics and Finance, Society for AEF, vol. 19(2), pages 703-727, November.
    5. Alhaj-Yaseen, Yaseen S. & Lam, Eddery & Barkoulas, John T., 2014. "Price discovery for cross-listed firms with foreign IPOs," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 80-87.

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