Essays on cross-list price disparity and market efficiency in emerging market

This dissertation includes two essays on emerging market. The first paper takes Chinese firms cross-listed in China mainland and Hong Kong as A-share and H-share between 1999 and 2013 as sample to look at the price disparity change and determination. This paper firstly finds that relative supply of stocks can explain up to 53% of the price disparity between A-share and H-share. The large supply of stocks in China mainland market can lead to narrow price disparity (low A-H price premium), and this factor can absorb the effects from other factors in previous literature, such as liquidity, speculation and political risks. This paper further tests several natural experiments of related policy changes that took place in China mainland in the sample period, namely IPO halts and stock reform, and confirms that real or expected stock supply change can significantly affect A-H price disparity. The second paper uses the intraday data based efficiency measures such as Hasbrouck Price Error (1993), and CRS (2005) related measures to investigate the Chinese stock markets between 1999 and 2013, to examine price efficiency in China. The first finding is that it takes between 70 minutes and 200 minutes for Chinese listed stocks converge to price efficiency, and Hasbrouck Price Error measure (1993) shows that around 40% price change is not accounted to random walk, which indicates about 4 times poorer efficiency than that in US. There is not significant improvement in market efficiency during the sample period. This paper finds out that the firms with low state-owned share percentage and low concentrated shares have better price efficiency, which indicates low information asymmetry from firm share structure helps improve stock price efficiency. This paper further tests several related institutional changes, and finds that share ownership reform and allowance of margin trading make price efficiency better while opening market to foreign investors by QFII policy does not. The findings in both papers in this dissertation offer important implications on asset pricing, corporate governance and policy making in emerging markets, especially those not fully open to worldwide and with high information asymmetry.Ph.D.Includes bibliographical referencesby Han Ya