TY - JOUR
T1 - Are domestic investors more informed than foreign investors? Evidence from the Perfectly Segmented Market in China
AU - Chan, K.A.
AU - Menkveld, A.J.
AU - Yang, Z.
PY - 2007
Y1 - 2007
N2 - This paper uses the perfect market segmentation setting in China's stock market to compare the information content of the stock trades of domestic and foreign investors. We study 76 firms that issue both A-shares (for domestic investors) and B-shares (for foreign investors) and compare the price discovery role of the two segmented markets in China. Before Feb 19, 2001, the A-share market led the B-share market in price discovery, as the signed volume and quote revision of the A-share market had strong predictive ability for B-share quote returns, but not vice versa. After Feb 19, 2001, because some domestic investors were allowed to invest in the B-share market, we find evidence for a reverse causality from the B-share to the A-share market. Nevertheless, the [Hasbrouck (1995). One security, many markets: determining the contributions to price discovery, Journal of Finance 50, 1175-1199.] information share analysis reveals that A-shares continue to dominate the price discovery process. © 2007 Elsevier B.V. All rights reserved.
AB - This paper uses the perfect market segmentation setting in China's stock market to compare the information content of the stock trades of domestic and foreign investors. We study 76 firms that issue both A-shares (for domestic investors) and B-shares (for foreign investors) and compare the price discovery role of the two segmented markets in China. Before Feb 19, 2001, the A-share market led the B-share market in price discovery, as the signed volume and quote revision of the A-share market had strong predictive ability for B-share quote returns, but not vice versa. After Feb 19, 2001, because some domestic investors were allowed to invest in the B-share market, we find evidence for a reverse causality from the B-share to the A-share market. Nevertheless, the [Hasbrouck (1995). One security, many markets: determining the contributions to price discovery, Journal of Finance 50, 1175-1199.] information share analysis reveals that A-shares continue to dominate the price discovery process. © 2007 Elsevier B.V. All rights reserved.
U2 - 10.1016/j.finmar.2007.07.001
DO - 10.1016/j.finmar.2007.07.001
M3 - Article
SN - 1386-4181
VL - 10
SP - 391
EP - 415
JO - Journal of Financial Markets
JF - Journal of Financial Markets
ER -
