Title

Red chips or H shares : which China-backed securities process information the fastest?

Document Type

Journal article

Source Publication

Journal of Multinational Financial Management

Publication Date

1-1-2000

Volume

10

Issue

3/4

First Page

315

Last Page

343

Keywords

China-backed securities, EGARCH, Information and market efficiency

Abstract

This study examines the information flow between China-backed securities, namely H shares, red chips, Shanghai and Shenzhen listed common shares. We document several findings. We find that an exponential generalized autoregressive conditional heteroscedasticity in mean (EGARCH-M) model appears to describe adequately the return process of the China-backed securities. Our empirical findings show that both H shares and red chips (which are listed in Hong Kong) are more sensitive to 'good' news than 'bad' news, while stocks listed in the China market are more sensitive to 'bad' news than 'good' news. Using a multivariate EGARCH-M model, we have found significant return and volatility spillover effects among the China-backed securities. Our study indicates that the red chips appear to spread information to other China-backed markets 'directly' or 'indirectly'. The results imply that the red chip market processes information faster than the other markets.

DOI

10.1016/S1042-444X(00)00026-8

Print ISSN

1042444X

E-ISSN

18731309

Publisher Statement

Copyright © 2000 Elsevier Science B.V.

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Recommended Citation

Poon, W. P. H., & Fung, H.-G. (2000). Red chips or H shares: Which China-backed securities process information the fastest? Journal of Multinational Financial Management, 10(3/4), 315-343. doi: 10.1016/S1042-444X(00)00026-8