CROSS-BORDER LISTINGS AND PRICE DISCOVERY. EVIDENCE FROM CHINESE COMPANIES TRIPLE-LISTED IN SHANGHAI, HONG KONG AND NEW YORK

  • Xiaoou YANG
  • Peng KUN

Abstract

This paper extends prior cross-listing literature by examining the Chinese stocks triple-listed in Hong Kong
Stock Exchange (SEHK), Shanghai Stock Exchange (SSE) and New York Stock Exchange (NYSE). We find that
the returns of the triple-listed stocks and the indexes are co-integrated in the long-run across the three markets,
indicating both an absence of arbitrage opportunities and long-term equilibrium. By employing the Granger
Causality test, we found that the foreign market (NYSE) plays the dominant role in price discovery (where
information is impounded into prices), therefore rejecting the home bias hypothesis that the home market
generates the most useful information about price movement. While the stock returns of NYSE were able to
influence the returns of both the SSE and the SEHK, the SSE market could not affect the NYSE and only on rare
occasions affects the SEHK. The same methodology to examine the co-integration and price discovery were
employed for 4 distinctive sub-periods: 2000-2003, 2003-2007, 2007-2009, and 2009-2013. It was found that
while China was a relatively independent market prior to the financial crisis, its integration with the global markets
has increased ever since.
Published
2014-08-15
How to Cite
YANG , Xiaoou ; KUN , Peng. CROSS-BORDER LISTINGS AND PRICE DISCOVERY. EVIDENCE FROM CHINESE COMPANIES TRIPLE-LISTED IN SHANGHAI, HONG KONG AND NEW YORK . Journal of Advanced Studies in Finance, [S.l.], v. 5, n. 1, p. 66-102, aug. 2014. ISSN 2068-8393. Available at: <https://journals.aserspublishing.eu/jasf/article/view/98>. Date accessed: 05 july 2022.
Section
Journal of Advanced Studies in Finance