Research On The Impact Of Shanghai-Hong Kong Stock Connect Program On Price Difference Of Cross-listing Stocks

Having experienced 25 years of development, China’s securities market has become the world’s second largest stock market after the United States.But the degree of development of the capital market of our country, especially thelevel of opening and maturity,lag behind with the United States and other mature financial markets.From the QFII, Equity Division Reform, QDII to the currentmarketization reform of interest rate and exchange rate, this series of various reform policies, are bound to build a mature financial market.The introduction of the policy of Shanghai-Hong Kong Stock Connect program,is also given themission of opening and deepening reform of financial market.For cross listing corporation in our country, price difference of A+ H share pricesis a research hot topic.Research on the price effect of Shanghai-Hong Kong Stock Connect program, have practical significancefor domestic and foreign investors, cross listing corporations and government regulators.This paper, which is based on the theoretical support of the differences in the stock price difference, mainly studies the impact of Shanghai-Hong Kong Stock Connect program as one of policy environment factors on the share price difference of the cross-listing corporation.Firstly, the paper introduces the concept of cross listing and the theory of stock price difference, and reviews the literatures on the research of cross listing price difference and the researchon the policy effect of Shanghai-Hong Kong Stock Connect program.Then this article reviews on the reform and opening policy process of China’s capital market, including the policy ofShanghai-Hong Kong Stock Connect program, and introduce the progress of the policy through the trial of six months.Based on the analysis of the major changes of the AH premium index bythe policy, the paper focused on thedescriptive analysis of the price change of A+ H shares bythe policy.Because of the impact of various macro factors and micro factors, the paper introduces virtual variable to represent the policy factor.Consideringmacroand microprice difference factors, the paper design the market model and the investors model based on the macro and micro perspectiverespectively, studying the specific impact of policy effect on cross-listing share pricefrom an empirical point of view. And the result pass the robustness test by using difference-in- difference method. Throughthe above descriptive analysis and empirical research, we get the following conclusions.First, Shanghai-Hong Kong Stock Connect program has a significant impact on share price in the Shanghai and Hong Kong stock market, and to a large extent is propulsive for A shares leading to the expansion of the A shares of the premium level of H shares.Second, in the market model and the investor model, the policy price effect of the expansion of the spread of A+H shares has been verified;Other factors that affect the stock price difference, including information asymmetry and riskcompensation, and even exchange rate have a significant impact on the stock price difference of A+H shares.Third, the policy also affects the stock price differences through other factors as the specific reasons for the role of A+ H share price difference.Shanghai-Hong Kong Stock Connect program is undoubtedly an important step to maturity and opening up for China’s capital market, the price difference between A+ H shares will eventually tend to be a rational level.Finally, this paper puts forward policy suggestions for the development of the capital market:First, strengthen education on investment, developing the concept of rational investment;Second, transforminvestment mode, expanding institutional investors; Third,strengthen corporate governance,standardizing information disclosure system;Fourth, standardize the behavior of brokers,improving the IPO listing system; fifth, innovative financial products, polishingup the capital market system.