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Does the Shanghai-Hong Kong stock connect policy reduce China’s A-H share price premium?

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  • Wei Zhang
  • Haifeng Li
  • Shuang Cao

Abstract

The Shanghai-Hong Kong Stock Connect programme provides a perfect experimental setting to test cross-listing theories. Using daily panel data of 54 firms dually listed on the Shanghai A-share and Hong Kong H-share markets from 4 January 2011 to 29 November 2019, this paper investigates the effect of the programme on A-H premium. The results demonstrate that the programme did not narrow the A-H valuation gaps, but rather significantly promoted the premium. The results also confirm the conventional arguments of information asymmetry, demand differential, and investors’ risk preference differential, which are proposed to explain price disparities between dual-listed stocks, but challenge liquidity differential and market risk differential hypotheses.

Suggested Citation

  • Wei Zhang & Haifeng Li & Shuang Cao, 2022. "Does the Shanghai-Hong Kong stock connect policy reduce China’s A-H share price premium?," Applied Economics Letters, Taylor & Francis Journals, vol. 29(15), pages 1428-1433, September.
    • Handle: RePEc:taf:apeclt:v:29:y:2022:i:15:p:1428-1433
    DOI: 10.1080/13504851.2021.1937489
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    Cited by:

    1. Ma, Feng & Lyu, Zhichong & Li, Haibo, 2024. "Can ChatGPT predict Chinese equity premiums?," Finance Research Letters, Elsevier, vol. 65(C).

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