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Analysis On The Premium Effect Of Chinese Penny Stocks And Its Causes

Posted on:2020-07-03Degree:MasterType:Thesis
Country:ChinaCandidate:L HuangFull Text:PDF
GTID:2439330590971455Subject:Finance
Abstract/Summary:PDF Full Text Request
The pricing efficiency of the capital market is the basic guarantee for the market itself to optimize the allocation of resources.However,for a long term,there exist various pricing anomalies in the capital market,such as the Calendar Anomalies,Post-earning-announcement Drift,Low-price Premium Effect,etc,which are severely affecting the efficiency of resource allocation of the capital market,and therefore remain to be settled by market decision-makers and monitors.In Chinese financial market,sensational concerns and topics about penny stocks are not rare,from both financial and stock commentators and investors.In financial media or stock comments,we can frequently see disputable headlines or reports entitled “Penny Stocks Leading the Rebound”,or “The Boom of Penny Stocks”,etc.To our surprise,Chinese financial scholars pay little attention to this phenomenon,which is a sharp contrast to the financial market.Through empirical analysis,this paper attempts to explore the question whether there are prominent excess earnings in penny stocks.If so,the paper aims to dig out the causes of excess earnings and to find out ways to eliminate them.On that basis,the paper takes Chinese A-shares capital market as the research object,empirically analyzing the sample data of 175718 months from 2000 to 2017 of A-shares listed companies.As is suggested by the result,there is remarkable low-price premium in Chinese capital market,which is still prominent in lag-phase 6 after the fundamental being controlled.Actually,the premium effect was not remarkable until the equity division reform in Chinese stock market.The premium effect gets stronger as more stocks of the listed companies being purchased by retail investors.In contrast,the effect is lowered by larger share-holding of investors from financing institutions.The effect is also strengthened by the high mobility of stocks.Besides,the research indicates that among the main board market,the increase of retail shareholders of SMEs board and GEM weakens the premium effect,while the mobility of stocks is ceasing to take effect in the SMEs board and GEM.According to the findings,the paper concludes that the amount of retail shareholders might be the major cause of the premium discrepancy between SMEs board and GEM.Of typical Bull and Bear markets,the low-price premium effect is much stronger in the former than in the latter,while the influence of retail shareholders is more prominent in Bull market than in the Bear market.In addition,the share-holding ratio of financial institutions has greater influence upon the premium effect in Bear market than in the Bull market,while the premium effect is no longer affected by the mobility of stocks in the Bull market.The paper ultimately discovers that in China,the low-price premium effect differs before and after the equity division reform,the major cause of which is the mobility of stocks.Meanwhile,it explains why Chinese scholars hold different views on low-price premium effect,thus offering proper complements to the literature made by previous contributors.
Keywords/Search Tags:Low-price Premium Effect, shareholding ratio of retail investors, shareholding ratio of financial institutions, mobility
PDF Full Text Request
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