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Stock Prices in a Speculative Market: The Chinese Split-Share Reform

Author

Listed:
  • Andrea Beltratti

    (Bocconi University)

  • Bernardo Bortolotti

    (Fondazione Eni Enrico Mattei and Università di Torino)

  • Marianna Caccavaio

    (Bocconi University)

Abstract

In 2005-2006 China reformed its stock market by eliminating non-tradable shares. The regulator set general guidelines and then assigned responsibility for implementation to each company. We derive relations that should have been followed by the prices of stocks and exploit a company-level data set to compare the actual and the theoretical price reactions. We find evidence for abnormal returns both before the beginning of the reform and during the reform. Cross-sectionally, abnormal returns are associated mainly with turnover and compensation. This shows that in a speculative market, investors do not properly react to unambiguous corporate actions.

Suggested Citation

  • Andrea Beltratti & Bernardo Bortolotti & Marianna Caccavaio, 2009. "Stock Prices in a Speculative Market: The Chinese Split-Share Reform," Working Papers 2009.15, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2009.15
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    Citations

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    Cited by:

    1. Yongheng Deng & Eric Girardin & Roselyne Joyeux & Shuping Shi, 2017. "Did bubbles migrate from the stock to the housing market in China between 2005 and 2010?," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 276-292, August.
    2. Girardin, Eric & Joyeux, Roselyne, 2013. "Macro fundamentals as a source of stock market volatility in China: A GARCH-MIDAS approach," Economic Modelling, Elsevier, vol. 34(C), pages 59-68.
    3. Enrico Geretto & Rubens Pauluzzo, 2012. "Stock Exchange Markets in China: Structure and Main Problems," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(1), pages 89-106, September.

    More about this item

    Keywords

    Speculation; Chinese Stock Market; Market segmentation; Event study; Market Efficiency;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

    NEP fields

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