Professional thesis
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Correlation Study on the Stock Premium of Companies with Dual Listing of A Shares and H Shares

ContributorsMu, Jun
Number of pages48
Imprimatur date2022
Defense date2022

Chinese stock trading system allows Chinese companies to list on stock markets of the mainland China, Hong Kong, and other countries. Under different considerations, enterprise management will choose one or more markets. A company listed on multiple securities markets simultaneously is a cross-listed company. When a company is listed in different stock markets, the prices of the stocks in different markets are different due to differences in trading systems, investor types, and investment strategies. There has always been a discrepancy in the stock prices between A-share and H-share cross-listed companies, with A-share prices often being higher than H-shares. The excessive price difference of AH shares will affect the fairness and efficiency of the market. In order to reduce the impact of the AH share price difference, the Shanghai-Hong Kong Stock Connect was established in 2014, through which investors of AH shares have been allowed to buy shares with each other. The Shanghai-Hong Kong Stock Connect strengthens the relationship between the two markets. However, it does not alleviate the premium difference of AH shares.

To further study the reasons for the difference in AH share prices, this paper will select companies listed on both A and H shares from 2019 to 2021 as samples. According to the market segmentation theory and the four market segmentation assumptions put forward by scholars, this paper will make corresponding assumptions. A fixed-utility model is applied to verify these assumptions. The results show that liquidity, risk, exchange rate, index, and Shanghai-Hong Kong Stock Connect will increase the premium of AH shares. Demand, information, and capital costs are inversely proportional to the premium of AH shares. The Shanghai-Hong Kong Stock Connect has not narrowed the premium difference due to strengthened linkages. On the contrary, the Shanghai-Hong Kong Stock Connect has intensified the premium of AH shares.

The substantial reason for the difference in the premium of AH shares is the difference between investors and the system. Investor differences in product risk assessment, access to information, and needs lead to various investment strategies. Individual investors account for a large proportion of A-share investors. Individual investors' investment strategies are more easily affected by emotions than institutional investors, have higher expectations for short-term returns, and therefore have higher risk tolerance. Investors in H shares are less risk-tolerant and therefore more cautious. Recommendations for reducing the spread are presented at the end of this paper.

  • Chinese Stock
  • Stock Premium
  • AH Shares
  • Dual Listed
Citation (ISO format)
MU, Jun. Correlation Study on the Stock Premium of Companies with Dual Listing of A Shares and H Shares. 2022.
Main files (1)
  • PID : unige:177629
  • Thesis number : 0034

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Creation06/05/2024 3:39:53 PM
First validation06/06/2024 6:45:51 AM
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