Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia

Mei, Jianping; Scheinkman, José A.; Xiong, Wei

doi:10.3386/w11362

Cited by 179 publications

(124 citation statements)

References 55 publications

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“…This conclusion was found in Latin America stock markets as reported by Saatccioglu and Starks 8 and Christofi and Pericli, 41 in the Swedish stock market as reported by Säfvenblad,10 in the New York stock exchange as reported by Gallant et al, 13 in the Taiwan stock market as reported by Hsin et al, 15 in selected developed stock markets as reported by Sabri,18 in selected emerging stock markets as reported by Sabri 17 and De Santis and Imrohorglu, 42 in the Shanghai stock exchange as reported by Song et al 16 and Mei et al, 12 and in the Turkish stock market as reported by Basci et al 43 The question arises here as to the major factors that may drive the Arab stock market to volume volatility. In general, the trading volatility may be associated to the transmission impact from other major markets and to the volatility spillovers concept from leading stock markets.…”

Section: Discussionmentioning

confidence: 81%

“…Jones et al, 11 however, found that the positive volatility-volume relation documented by numerous researchers reflected a positive relationship between volatility and number of transactions. Mei et al 12 found that trading caused by investors' speculative motives could explain a significant fraction of the price difference between the dual-class shares. Gallant et al 13 investigated the price and volume co-movement using daily data from 1928 to 1987 for the New York stock exchange and found positive correlation between conditional volatility and volume.…”

Section: Volume and Stock Price Movementsmentioning

confidence: 99%

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The impact of trading volume on stock price volatility in the Arab economy

Sabri

2008

J Deriv Hedge Funds

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This study intends to examine the price-volume movements in the Arab stock markets, in order to determine the impact of changes in trade volume on the volatility of stock prices as expressed by the unified AMF stock price index. The research covers a sample of eight out of the 15 Arab stock markets included in the Arab Monetary Fund database, using monthly data from 1994 to 2006. The study found that there is an increase in both trading volume and stock price volatility, which may be considered a recent phenomenon in the majority of the Arab stock markets. The study also found that the volume-stock price movements are significantly integrated for all selected markets, while the highest (to lowest) correlation coefficient between volume and stock price movement was found in the Saudi stock market, Amman stock market, Muscat stock market, and Kuwait stock market (in that order). Finally, the correlation between volume and price movement is higher in the stock markets of the oil Arab states compared to the nonoil Arab states.

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Section: Discussionmentioning

confidence: 81%

Section: Volume and Stock Price Movementsmentioning

confidence: 99%

The impact of trading volume on stock price volatility in the Arab economy

Sabri

2008

J Deriv Hedge Funds

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“…This causes a bubble in stock prices. Mei, Scheinkman, and Xiong (2005) show that this hypothesis can explain Chinese A-B share premia.…”

Section: Introductionmentioning

confidence: 99%

Stock Market Mispricing: Money Illusion or Resale Option?

Chen¹,

Lung²,

Wang³

2009

J. Financ. Quant. Anal.

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We examine two hypotheses to explain stock mispricing: (a) the money illusion hypothesis (Modigliani and Cohn (1979)) and (b) the resale option hypothesis (Scheinkman and Xiong (2003)). We find that the money illusion hypothesis may explain the level, but not the volatility of mispricing in the US market. By contrast, the stock resale option hypothesis, which stems from heterogeneous beliefs about future dividend growth rates and short-sales constraints, can explain both the level and the volatility of mispricing. The evidence suggests that while the two hypotheses complement each other in explaining the level of mispricing, the resale option hypothesis provides a more coherent explanation for asset price bubbles, in which extraordinarily high price levels are often accompanied by excessive volatility and frenzied trading.JEL classification: E31, E44, G12, G14

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“…They find that hybrid firms are the ones that rely the most on "self-fundraising," which includes financing from retained earnings, borrowing from local governments, communities, and other investors. Xiong (2005) document that during the 1990s there has been large price differences between the A and B shares of the same firms, and relate this fact to the high turnover in the A-share market, relative to the B-share market. They find that the firms with a high "A-B premium" are also the firms with high turnover ratios, and also with high volatility of returns.…”

Section: Aiaii the Domestic Financial Systemmentioning

confidence: 99%

The International Financial Integration Of China And India

Lane¹,

Schmukler²

2007

Policy Research Working Papers

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Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China's FDI liabilities), these countries are large holders of official reserves. Second, their international balance sheets are highly asymmetric: both are "short equity, long debt." Third, China and India have improved their net external positions over the last decade although, based on their level of economic development, neoclassical models would predict them to be net borrowers. Domestic financial policies seem essential in understanding these patterns of integration. These include financial liberalization and exchange rate policies; domestic financial sector policies; and the impact of financial reform on savings and investment rates. Changes in these factors will affect the international financial integration of China and India (through shifts in capital flows and asset/liability holdings) and, consequently, the international financial system. JEL Classification Numbers: F02; F30, F31, F32, F33, F36

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Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia

Cited by 179 publications

References 55 publications

The impact of trading volume on stock price volatility in the Arab economy

The impact of trading volume on stock price volatility in the Arab economy

Stock Market Mispricing: Money Illusion or Resale Option?

The International Financial Integration Of China And India

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