H-share Market Research Articles

The Relationship between Earnings Momentum and Price Momentum in Different Market - The Case of the China Market

This study focuses on the stocks that are listed in A- and H-share markets from January 2000 to December 2009. Following Chan, Jegadeesh and Lakonishok (1996), we test the profitability of price momentum and earnings momentum strategies under different market systems and accounting standards. In addition, we also adopt the method documented by Chordia and Shivakuma (2006) to examine whether earnings momentum and price momentum are related. The empirical results show that the price momentum effect has a significant and persistent phenomenon in H-share market instead of A-share market. Besides, the earnings momentum strategy would generate a significantly positive return in each market. This implies that the difference of accounting information content between the two markets does not inflect the profitability of earnings momentum strategy. Due to the price momentum strategy have an insignificant return in the A-share market, we only focus on the discussion of relationship between earnings and price momentum in H-shares. From the results, we find that price momentum is captured by the earnings momentum. The predictive power of past returns is subsumed by a strategy that buying the highest earnings surprise portfolio and selling the lowest earnings surprise portfolio.

Uncertainty of Information, Reaction of Investors and Post-Earnings Announcement Drift: Some Empirical Evidences from A-H Share Markets of China

By means of Event Study, Panel Data Regression and Feasible Generalized Least Squares, we discuss the influence of uncertainty of information on the Post-Earnings Announcement Drift. We find that there are not significant differences between the H-share financial statements and the A-share financial statements, which means the performances of PRC-GAAP and HK-GAAP are the same basically. On the other hand, some non-financial factors such as annually trading amount, average prices of A-H shares and average shares of shareholders are different statistically. Besides, the individual traders are dominant in the A-share market while the institutions are dominant in the H-share market. The most important result of our research is that uncertainty of information play a crucial role in the PEAD of segmented markets. No matter what types of traders are in the segmented markets, the uncertainty of information can efficiently magnify PEAD.

Cross-listing and bonding premium: Evidence from Chinese listed companies

This paper examines whether cross-listing enables firms to earn a higher valuation. We contrast a sample of 580 Chinese firms cross-listed on the B-share market of China and 159 Chinese firms cross-listed on the Hong Kong H-share market against a control sample of domestic firms listed only on the A-share market of China. It is found that firms cross-listed on B-share and H-share markets both enjoy bonding premiums. Moreover, the bonding premium is larger for H-share firms than for B-share firms. Results show that the amount of bonding premium is positively related to the level of investor protection, which provides supporting evidence to the bonding theory.

Modeling Heterogeneous Beliefs and Short Sale Constraint: Evidences from Segmented Capital Markets of China

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.

Policy change and lead–lag relations among China's segmented stock markets

This paper uses linear and nonlinear Granger causality tests to study the lead–lag relations among China's segmented stock markets. In contrast to the weak lead–lag relation among A- and B-share markets disclosed by its linear counterpart, a nonlinear causality test provides evidence of strong bi-directional causal relations between two A-share markets as well as between two B-share markets. In addition, the evidence shows that since the implementation of a new policy allowing domestic citizens to invest in B-share markets, A-share markets tend to lead their B-share counterparts in the same stock exchange and B-share markets continue to lead the H-share market.

Bonding Premium as a General Phenomenon

We suggest that Doidge et al.'s (2004) finding of non-U.S. firms worth more when listed in the U.S. is a special case of a general phenomenon. When firm bonds to a market by listing there, it tends to enjoy the premium. As to where the quality market is physically located, it is not critical. We provide strong supporting evidence from examining Chinese firms cross-listed in various markets. We contrast a sample of 111 Chinese firms listed on the higher quality China B-share market and 53 Chinese firms listed on the even higher quality Hong Kong H-share market against a control sample of domestic firms listed only on the low-quality China A-share market. We recorded general existence of cross-listing premiums of the B-share and H-share firms' stocks traded on the A-share market. More importantly, the cross-listing premium is larger for H-share firms than for B-share firms. As Chinese stocks trade at a price discount in the B-share and H-share markets, observing the cross-listing premium in the A-share market should be viewed as particularly supportive to the bonding hypothesis since other confounding effects, such as the diversification effect, simply do not exist in such a price-discount market situation.