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Market and Price Linkage for Dual-Listings

Market and Price Linkage for Dual-Listings

Copyright: © 2014 |Pages: 51
ISBN13: 9781466650473|ISBN10: 1466650478|EISBN13: 9781466650480
DOI: 10.4018/978-1-4666-5047-3.ch005
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MLA

Lixian Liu. "Market and Price Linkage for Dual-Listings." International Cross-Listing of Chinese Firms, IGI Global, 2014, pp.155-205. https://doi.org/10.4018/978-1-4666-5047-3.ch005

APA

L. Liu (2014). Market and Price Linkage for Dual-Listings. IGI Global. https://doi.org/10.4018/978-1-4666-5047-3.ch005

Chicago

Lixian Liu. "Market and Price Linkage for Dual-Listings." In International Cross-Listing of Chinese Firms. Hershey, PA: IGI Global, 2014. https://doi.org/10.4018/978-1-4666-5047-3.ch005

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Abstract

Chinese firms that cross-list in the China A-share market, China B-share market, Hong Kong, and other international locations operate in a complex environment. Theoretically, when one firm is trading on multiple exchanges, the shares across exchanges are expected to be perfect substitutes, and when they are not, an arbitrage opportunity exists. Using quantitative methods, this chapter explores whether there are price and volatility disparities. The Froot and Dabora (1999) approach is used to investigate which of the markets is dominant. Engle and Granger (1987) evaluates whether there is a long-term relationship between these markets, and error correction models are used to check for the speed at which prices are restored in equilibrium. Although the majority of cross-listed Chinese securities become cointegrated in the long term, the information flow exhibits a uni-directional feature and demonstrates that overseas markets have influential power over price changes.

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