Publication Type

Journal Article

Version

acceptedVersion

Publication Date

3-2023

Abstract

This paper examines the price comovement of cross-listed Chinese A- and H-shares using a panel model with latent factors and a heterogeneous long-run structure. Our model is more flexible than the cointegration system and is estimated using the data-driven Cup–Lasso method. The long-run H-share price discounts are heterogeneous across different groups of stocks. We have identified both stationary and nonstationary latent factors in the price differentials, which are driven by different economic variables. By analyzing the factor loadings of the nonstationary latent factor, we identify some trading-friction and information-friction variables that have effects on the price convergence between the A- and H-shares.

Keywords

Common latent factors, Cross-listing, Cup-Lasso method, Market segmentation, Panel model

Discipline

Asian Studies | Corporate Finance | Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Journal of International Money and Finance

Volume

131

First Page

1

Last Page

19

ISSN

0261-5606

Identifier

10.1016/j.jimonfin.2022.102794

Publisher

Elsevier

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.jimonfin.2022.102794

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