Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 300: Panel Cointegration of Chinese A and B Shares
Niklas Ahlgren (), Bo Sjö () and Jianhua Zhang ()
Additional contact information
Niklas Ahlgren: Swedish School of Economics, Department of Finance, Postal: PO Box 479 (Arkadiagatan 22), 00101 Helsingfors, Finland
Bo Sjö: Swedish Agency for Development Evaluation, Postal: PO Box 1902, 651 19 Karlstad, Sweden
Jianhua Zhang: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: In this paper we study market segmentation and 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 prices of the A and B shares on the Shanghai and Shenzhen stock exchanges. We find that the A-share premia are nonstationary and 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. Our findings suggest that the relaxation of the investment restrictions decreased the information asymmetry betwen the A- and B-share markets in China.
Keywords: Chinese A and B shares; Market segmentation; Information flow; Panel unit root and cointegration tests
33 pages, April 21, 2008
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