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Choice of Information Learning: Evidence from Revisiting Price Discovery during the 2006 Dual Listing Craze in China

Zhang, Y.; Gao, X.; Niu, S.

Choice of Information Learning: Evidence from Revisiting Price Discovery during the 2006 Dual Listing Craze in China Thumbnail


Authors

X. Gao

S. Niu



Abstract

Extant studies have proposed information choice models to explain the home bias puzzle. In this paper, we explore information asymmetries among local and non-local investors which are captured by market microstructure variables to explain the reper-cussions of their information choices. We examine the short-run price dynamics, co-integrating relations, and price discovery processes of cross-listed Chinese firms. Using high-frequency data over the year 2006 of dual listing craze in history, we find that the local A-share market contributes to the price discovery for 68% to 75% of the firms, which is far more than the contribution of the non-local H-share market. Our results support the learning choice model and suggest that local Chinese investors may be endowed with a small home information advantage and their learning choices magnify information asymmetry. As such, the local stock market incorporates new information faster and contributes more to the price discovery of dual-listed firms in mainland China.

Citation

Zhang, Y., Gao, X., & Niu, S. (2021). Choice of Information Learning: Evidence from Revisiting Price Discovery during the 2006 Dual Listing Craze in China. Theoretical Economics Letters, 11(6), 1165-1182. https://doi.org/10.4236/tel.2021.116074

Journal Article Type Article
Acceptance Date Oct 29, 2021
Publication Date 2021-12
Deposit Date Nov 19, 2021
Publicly Available Date Apr 12, 2023
Journal Theoretical Economics Letters
Print ISSN 2162-2078
Electronic ISSN 2162-2086
Publisher Scientific Research Publishing
Peer Reviewed Peer Reviewed
Volume 11
Issue 6
Pages 1165-1182
DOI https://doi.org/10.4236/tel.2021.116074
Public URL https://durham-repository.worktribe.com/output/1224023

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