Capital account reform and short- and long-run stock price leadership

Cai, C.X.; McGuinness, P.B.; Zhang, Q.

doi:10.1080/1351847x.2015.1105272

Capital account reform and short- and long-run stock price leadership

Cai, C.X.; McGuinness, P.B.; Zhang, Q.

Authors

C.X. Cai

P.B. McGuinness

Q. Zhang

Abstract

This paper studies the effect of capital account liberalization policies on the price discovery of cross-listings in Chinese stocks. We construct a non-linear causality framework that decomposes short- and long-run dimensions of price leadership. Our analysis shows that capital account liberalization has had a profound effect on long-run A- and H-price leadership traits. Specifically, increased inward capital movement from Qualified Foreign Institutional Investors strengthens long-term leadership in the mainland A-market. Similarly, increased capital outflow from the Chinese mainland galvanizes long-term price discovery processes in the Hong Kong H-market. We thus offer strong evidence that capital account liberalization promotes stock market efficiency in the long-run. The present study's empirical account also suggests that such capital flows inhibit short-term lead-lag effects.

Citation

Cai, C., McGuinness, P., & Zhang, Q. (2015). Capital account reform and short- and long-run stock price leadership. European Journal of Finance, 23(10), 916-945. https://doi.org/10.1080/1351847x.2015.1105272

Journal Article Type	Article
Acceptance Date	Oct 2, 2015
Online Publication Date	Nov 3, 2015
Publication Date	Nov 3, 2015
Deposit Date	Dec 3, 2015
Publicly Available Date	May 3, 2017
Journal	European Journal of Finance
Print ISSN	1351-847X
Electronic ISSN	1466-4364
Publisher	Taylor and Francis Group
Peer Reviewed	Peer Reviewed
Volume	23
Issue	10
Pages	916-945
DOI	https://doi.org/10.1080/1351847x.2015.1105272
Keywords	Capital account liberalization, A- and H-share cross-listings, Short- and long-run price leadership, G01, G15, G18.
Public URL	https://durham-repository.worktribe.com/output/1396935

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Copyright Statement
This is an Accepted Manuscript of an article published by Taylor & Francis Group in The European Journal of Finance on 03/11/2015, available online at: http://www.tandfonline.com/10.1080/1351847X.2015.1105272.