Abstract
Provided that the investors have different information processing abilities in segmented markets, I build a two-stage model including heterogeneous beliefs of investors to prove that heterogeneous beliefs and short sale constraint is one of the reasons which result in lower H-share price than A-share price, and provide some empirical evidences by using data in A-share market and H-share market of China. This study could theoretically explain the anomalies of China’s segmented capital markets and be helpful to analyze the microstructure for the emerging capital markets of China.
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