The Price Relationships among the Chinese Company’s Shares Listing Domestically and Abroad
This thesis investigates the price relationships among 14 Chinese companies’ shares traded on domestic and foreign exchanges, i.e. the mainland China stock exchanges [either the Shanghai stock exchange (SHS), or the Shenzhen stock exchange (SHZ)], Hong Kong stock exchange (HKEK) and New York stock exchange (NYSE). The both stock exchanges (SHS, SHZ) in China are taken as one object to analysis. Firstly, the test on whether the stock prices are stationary or not, is performed by testing the unit roots and autocorrelation. The test results show that generally the stock prices are not stationary. Secondly, the tests are performed on the difference series or the return series. The result indicates that the first differences of the stock prices are all stationary. Thirdly, the cointegration tests are performed. The tests show that there are no longterm cointegrations between the prices of the company’s shares listed on China (SHS, SHZ) and Hong Kong (HKEX) or China (SHS, SHZ) and New York (NYSE). However, there is a cointegration between the Company’s stock prices on HKEX and those on NYSE, which indicates that the efficiency in terms of price discovery existing between the foreign exchanges rather than the domestic and foreign exchange. Finally, the Granger test is employed to perform on the returns series since it cannot be used on the non-stationary series, the share prices. The empirical analysis reveals that price discovery exists only between HKEX and NYSE, which are consistent with the previous cointegration tests. The reasons could be that HKD is pegged USD. The China market shows a high segmentation due to its strict capital control and restrictions on foreign exchange. Although, the common culture, language and other characteristics should give rise to an integrated capital market between the mainland China and Hong Kong, this relationship seems not existing, neither between the China and U.S. markets.
Göteborg University. School of Business, Economics and Law