Work detail

The A- and H-Share Anomaly on the Chinese Stock Market

Author: Bc. Libuše Vošahlíková
Year: 2008 - summer
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Work type: Bachelors
Language: English
Pages: 45
Awards and prizes: B.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance.
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Abstract: This thesis examines the price anomaly of A- and H-shares on the Chinese stock market. Chinese stock market is characterized by strict segmentation of foreign and domestic (Chinese) investors when buying or selling stocks. Foreign investors are allowed to trade the special class of H-shares on the Hong Kong Stock Exchange. Domestic investors can only trade A-shares on Shenzhen or Shanghai Stock Exchange. Both classes of shares are legally identical; they have the same voting rights and are a subject to the same streams of dividends. However, the prices differ substantially. The analyses in this thesis reveal that the most significant explanations for the price difference are the demand, liquidity and risk hypotheses. This means that the price discount of H-shares is mainly caused by the limited investment opportunities of Chinese investors, higher liquidity of A-shares and higher risk incorporated in H-shares for the foreign investors. Future research should attempt to collect specific data that would allow for testing the behavioral hypotheses, particularly the overconfidence bias.
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