IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v19y2009i23p1859-1871.html
   My bibliography  Save this article

Panel cointegration of Chinese A and B shares

Author

Listed:
  • Niklas Ahlgren
  • Bo Sjo
  • Jianhua Zhang

Abstract

We study information flows in China's stock markets. By using panel data methods we test for a unit root in the price premium of domestic investors' A shares over foreign investors' B shares, as well as cointegration between the A- and B-share prices on the Shanghai and Shenzhen stock exchanges. We find that the A-share premia are nonstationary, and that the A- and B-share prices are not cointegrated up till January 2001. After February 2001, when domestic investors were allowed to trade B shares, the A-share premia become stationary and the A- and B-share prices cointegrated. One interesting result from the panel data analysis is that most firms' A and B shares are cointegrated, but not all firms. Cointegration is more likely for firms with a small A-share premium, low ratio of nontradeable shares, high growth rate and large B-share market capitalization relative to the A-share market capitalization. Our findings suggest that the relaxation of the investment restrictions decreased the segmentation between the A- and B-share markets in China.

Suggested Citation

  • Niklas Ahlgren & Bo Sjo & Jianhua Zhang, 2009. "Panel cointegration of Chinese A and B shares," Applied Financial Economics, Taylor & Francis Journals, vol. 19(23), pages 1859-1871.
    • Handle: RePEc:taf:apfiec:v:19:y:2009:i:23:p:1859-1871
    DOI: 10.1080/09603100903122182
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100903122182
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09603100903122182?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    2. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
    3. Rolf Larsson & Johan Lyhagen & Mickael Lothgren, 2001. "Likelihood-based cointegration tests in heterogeneous panels," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 1-41.
    4. John Y. Campbell, Robert J. Shiller, 1988. "The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors," The Review of Financial Studies, Society for Financial Studies, vol. 1(3), pages 195-228.
    5. Chung-Hua Shen & Chien-Fu Chen & Li-Hsueh Chen, 2007. "An empirical study of the asymmetric cointegration relationships among the Chinese stock markets," Applied Economics, Taylor & Francis Journals, vol. 39(11), pages 1433-1445.
    6. Kalok Chan & Albert J. Menkveld & Zhishu Yang, 2008. "Information Asymmetry and Asset Prices: Evidence from the China Foreign Share Discount," Journal of Finance, American Finance Association, vol. 63(1), pages 159-196, February.
    7. John Fernald & John H. Rogers, 2002. "Puzzles In The Chinese Stock Market," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 416-432, August.
    8. Haiwei Chen & James Chong & Changjiang Lu & Kemin Wang, 2008. "The Effectiveness of Regulatory Policy Changes on the Volatility Dynamics of the Chinese Stock Markets," Chinese Economy, Taylor & Francis Journals, vol. 41(2), pages 5-23, March.
    9. Jian Yang, 2003. "Market Segmentation and Information Asymmetry in Chinese Stock Markets: A VAR Analysis," The Financial Review, Eastern Finance Association, vol. 38(4), pages 591-609, November.
    10. Patricia Chelley-Steeley & Weihua Qian, 2005. "Testing for market segmentation in the A and B share markets of China," Applied Financial Economics, Taylor & Francis Journals, vol. 15(11), pages 791-802.
    11. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    12. Chakravarty, Sugato & Sarkar, Asani & Wu, Lifan, 1998. "Information asymmetry, market segmentation and the pricing of cross-listed shares: theory and evidence from Chinese A and B shares," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 325-356, December.
    13. Chan, Kam C. & Fung, Hung-Gay & Thapa, Samanta, 2007. "China financial research: A review and synthesis," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 416-428.
    14. repec:bla:obuest:v:61:y:1999:i:0:p:631-52 is not listed on IDEAS
    15. Chien-Liang Chiu & Jui-Cheng Hung, 2007. "Normal and abnormal information transmissions: evidence from China's stock markets," Applied Economics Letters, Taylor & Francis Journals, vol. 14(12), pages 863-870.
    16. Tom Engsted & Jesper Lund, 1997. "Common stochastic trends in international stock prices and dividends: an example of testing overidentifying restrictions on multiple cointegration vectors," Applied Financial Economics, Taylor & Francis Journals, vol. 7(6), pages 659-665.
    17. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    18. Changjiang Lu & Kemin Wang & Haiwei Chen & James Chong, 2007. "Integrating A- and B-Share Markets in China: The Effects of Regulatory Policy Changes on Market Efficiency," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 309-328.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhaoxin Dai & Yunfeng Hu & Guanhua Zhao, 2017. "The Suitability of Different Nighttime Light Data for GDP Estimation at Different Spatial Scales and Regional Levels," Sustainability, MDPI, vol. 9(2), pages 1-15, February.
    2. ZhongXiang Zhang, 2012. "Climate Change Meets Trade in Promoting Green Growth: Potential Conflicts and Synergies," Chapters, in: Chin Hee Hahn & Sang-Hyop Lee & Kyoung-Soo Yoon (ed.), Responding to Climate Change, chapter 6, Edward Elgar Publishing.
    3. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ahlgren, Niklas & Sjö, Bo & Zhang, Jianhua, 2008. "Panel Cointegration of Chinese A and B Shares," Working Papers in Economics 300, University of Gothenburg, Department of Economics.
    2. Ahlgren, Niklas & Sjöö, Boo & Zhang, Jianhua, 2003. "Panel Cointegration of Chinese A and B Shares," Working Papers 500, Hanken School of Economics.
    3. Hasanov, Fakhri J. & Bulut, Cihan & Suleymanov, Elchin, 2016. "Do population age groups matter in the energy use of the oil-exporting countries?," Economic Modelling, Elsevier, vol. 54(C), pages 82-99.
    4. Donald Lien & Chun-Da Chen, 2020. "B-share discount puzzle in China: a revisit of dual-share firms," Review of Managerial Science, Springer, vol. 14(5), pages 1047-1075, October.
    5. Güzin Bayar, 2022. "Turkey's sectoral exports: A competitiveness approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2268-2289, April.
    6. Tsangyao Chang & Wen-Chi Liu & Goodness C. Aye & Rangan Gupta, 2016. "Are there housing bubbles in South Africa? Evidence from SPSM-based panel KSS test with a Fourier function," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 18(5), pages 517-532.
    7. Jacobo Campo Robledo & Juan Pablo Herrera Saavedra, 2016. "Patentes y crecimiento económico: ¿innovación de residentes o no residentes?," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, vol. 76, February.
    8. Jacobo Campo Robledo & Henry Antonio Mendoza Tolosa, 2014. "Gasto Público y Crecimiento Económico regional en Colombia (1984 - 2012)," Documentos de Trabajo 12425, Universidad Católica de Colombia.
    9. Shahbaz, Muhammad & Nasreen, Samia & Ling, Chong Hui & Sbia, Rashid, 2014. "Causality between trade openness and energy consumption: What causes what in high, middle and low income countries," Energy Policy, Elsevier, vol. 70(C), pages 126-143.
    10. Munawar-Shah, Syed & Abdul-Majid, Mariani & Hussain-Shah, Syed, 2014. "Assessing Fiscal Sustainability for SAARC and IMT-GT Countries," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 5(2), pages 26-40.
    11. Ruhul Salim & Kamrul Hassan, 2009. "Does the relative population growth affect purchasing power parity?," Applied Economics Letters, Taylor & Francis Journals, vol. 16(1), pages 103-107.
    12. Wilman-Santiago Ochoa-Moreno & Byron Alejandro Quito & Carlos Andrés Moreno-Hurtado, 2021. "Foreign Direct Investment and Environmental Quality: Revisiting the EKC in Latin American Countries," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    13. Chebli Mongi & Kais Saidi, 2024. "The Impact of Corruption, Government Effectiveness, FDI, and GFC on Economic Growth: New Evidence from Global Panel of 48 Middle-Income Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 10696-10721, September.
    14. Campo, Jacobo & Mendoza, Henry, 2018. "Gasto público y crecimiento económico: un análisis regional para Colombia, 1984-2012," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 88, pages 77-108, January.
    15. Tsangyao Chang & Tsung-Pao Wu & Rangan Gupta, 2015. "Are house prices in South Africa really nonstationary? Evidence from SPSM-based panel KSS test with a Fourier function," Applied Economics, Taylor & Francis Journals, vol. 47(1), pages 32-53, January.
    16. Khan, Muhammad Azhar & Khan, Muhammad Zahir & Zaman, Khalid & Arif, Mariam, 2014. "Global estimates of energy-growth nexus: Application of seemingly unrelated regressions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 63-71.
    17. Kristofer Månsson & Ghazi Shukur & Pär Sjölander, 2013. "Testing for panel unit roots in the presence of spatial dependency," Applied Economics, Taylor & Francis Journals, vol. 45(29), pages 4152-4159, October.
    18. Valérie Mignon & Christophe Hurlin, 2005. "Une synthèse des tests de racine unitaire sur données de panel," Économie et Prévision, Programme National Persée, vol. 169(3), pages 253-294.
    19. Lee, Chien-Chiang & Chang, Chun-Ping, 2008. "Energy consumption and economic growth in Asian economies: A more comprehensive analysis using panel data," Resource and Energy Economics, Elsevier, vol. 30(1), pages 50-65, January.
    20. Carlos Alberto Barreto Nieto & Jacobo Campo Robledo, 2012. "Relación a largo plazo entre consumo de energía y PIB en América Latina: Una evaluación empírica con datos panel," Revista Ecos de Economía, Universidad EAFIT, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:19:y:2009:i:23:p:1859-1871. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.