Market liberalization within a country
China's B-share market, which used to be restricted to foreign investors, was partially opened up in February 2001 to Chinese local investors. We take this as a controlled experiment in cross-border trading on a small scale. We find mild but positive effects on the B-share market, with higher volumes, lower levels of volatility, lower bid-ask spreads and more liquidity after liberalization. Between A- and B-shares, price disparities narrowed; the correlation and the co-integration relationships became stronger; and the flow of information became more balanced. More new individual investors entered into the B-share market without crowding out existing institutional investors. Even though the liberalization measure is partial and one-way, it has helped to improve the quality of the B-share market, and our results lend no support to the popular claim that liberalization does nothing but help the existing foreign shareholders to cash out.
Year of publication: |
2009
|
---|---|
Authors: | Sun, Qian ; Tong, Wilson H.S. ; Yan, Yuxing |
Published in: |
Journal of Empirical Finance. - Elsevier, ISSN 0927-5398. - Vol. 16.2009, 1, p. 18-41
|
Publisher: |
Elsevier |
Keywords: | Partial liberalization Cross-market trading Market quality Market segmentation China |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Market liberalization within a country
Sun, Qian, (2009)
-
Market liberalization within a country
Sun, Qian, (2009)
-
Bonding Premium as a General Phenomenon
Sun, Qian, (2006)
- More ...