Study On The Price Differentials Between Chinese A And B Shares Based On Asymmetry Information And Liquidity

There is a special phenomenon in China's stock market, that is the shares denoted the same listed companies'proprietary equity are restricted to trade in different markets in the face of different investors, and large differences always exist in their prices between these dual listed companies. Namely, the price of B shares mostly available to the foreign investors is different largely from the price of A shares mostly available to the domestic investors. The reasons for this phenomenon of price differentials have became the hotspot issues lately paid attention by the foreign and domestic scholars, and have been given several theoretical explains. This paper has progressively relaxed the hypotheses in asymmetry information and liquidity from the classical CAPM model, give the theoretical explain to this special phenomenon, and verify the theoretical results by the empirical analysis. This paper firstly reviewed the relevant theories about asymmetry information and liquidity, then went deep into the application of these basic theories in stock market, which has offered theoretical foundation for the understanding of the influence of asymmetry information and liquidity on stock pricing. In the following two chapters, this paper has researched the influence of asymmetry information and liquidity on stock pricing respectively that were applied into the explanation of price differentials between A and B shares. In chapter three, from the notion of asymmetry information, the author has discussed the types of the phenomenon of asymmetry information and the causes of its appearance, then deducted the stock pricing model on occasion of asymmetry information between investors according to the objective state of A and B shares facing different investors and showed the causes of price differentials through this model. After that this paper continued to analyze the causes of asymmetry information, concluded several representative factors, that is, stock market value, total capital and non-tradable shares percents, which leaded to asymmetry information between investors to affect the price differentials between A and B shares. In chapter four, the author firstly showed the influence of liquidity on stock pricing by liquidity costs adjusted CAPM model, then offered a comprehensive introduction of descriptions of all properties of liquidity, last chose factors from all aspects of liquidity respectively to analyze the influence of liquidity on stock price differentials. In the part of empirical analysis, this paper brought out the hypotheses of influence of asymmetry information and liquidity on price differentials between A and B shares on basis of the theoretical analyzing result in order to validate whether asymmetry information and liquidity would affect the forming of price differentials between A and B shares, as well as the actual factors which caused those differentials. By cross sectional and panel regression analysis, the author has validated the above hypotheses respectively and obtained the primary conclusions of the influence of asymmetry information and liquidity on stock price differentials. According to these conclusions, this paper advanced relevant suggestion. At the end of this paper, there has appeared the last conclusion of the whole research, that is, both asymmetry information and liquidity are the causes of price differentials between China's A and B shares, while liquidity is the main one. The influence of liquidity on price differentials has principally been presented by turnover rate, however the influence of asymmetry information on price differentials has showed in companies'market value and non-tradable shares percents.