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

Zhang, Y. and Gao, X. and Niu, S. (2021) 'Choice of Information Learning: Evidence from Revisiting Price Discovery during the 2006 Dual Listing Craze in China.', Theoretical Economics Letters .

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.

Item Type:Article
Full text:Publisher-imposed embargo
(AM) Accepted Manuscript
File format - PDF
(452Kb)
Status:Peer-reviewed
Publisher Web site:http://www.scirp.org/journal/tel/
Date accepted:29 October 2021
Date deposited:19 November 2021
Date of first online publication:2021
Date first made open access:No date available

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