Market Segmentation, Price Disparity, and Transmission of Pricing Information: Evidence from Class A and H Shares of Chinese Dual-Listed Companies

Abstract

This paper examines the transmission of pricing information and the volatility of dual-listed stocks between class A and H shares of Chinese companies.First, using firm level data, we show that there is a large price discount for H shares relative to the A shares. Second, when we divide the firms into a high price disparity group and a low price disparity group, we find that the high price disparity group's pricing information transmission is stronger than the low price disparity group during the pre-liberalization period (in terms of significant mean coefficients). Third, when we divide the entire sample period into a pre-liberalization period and a post-liberalization, we find that the mean value spillover is stronger during the post-liberalization period for the low price disparity group. Finally, we report that during the post-liberalization period, the volatility spillover increases from A shares to H shares while it decreases from H shares to A shares. This implies that there is an information advantage of H shares, disappearing with the liberalization of A shares.