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

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

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.[phone]

• 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.[phone]
• Public URL: https://durham-repository.worktribe.com/output/1224023