Author

Yuqian RONG

Date of Award

2011

Degree Type

Thesis

Degree Name

Master of Philosophy (MPHIL)

Department

Economics

First Advisor

Dr. RAN Jimmy

Second Advisor

Prof. MA Yue

Abstract

A growing number of Chinese corporations have been listing their shares on foreign stock markets. Hong Kong Stock Exchange (HKEX) and New York Stock Exchange (NYSE) are their major targets. Taking China’s exchange rate system reform as a unique event, I examine the price disparity between A-share and H-share (or ADR) using a sample of 28 Chinese companies listed in Shenzhen, Shanghai, Hong Kong, and New York. I conduct a panel-data investigation to examine the price disparity before and after the transition from the pegged to the managed floating exchange rate.

I have obtained several important findings in this study. First, RMB exchange rate reform in 2005 has significant effect on price disparity between A-shares and H-shares and also between A-share and ADR, which shows that relaxation of the exchange rate control brings about a clear convergence of A-share price with foreign share price. This result is robust with different models. Second, we also found that currency factor has significant effect on price premium between A-shares and foreign shares. Appreciation in RMB would lead to a decrease in price premium. In addition, exchange rate reform exerts its effect whether or not we take into account the impact from the Split-share structure reform.

Keywords

Stocks, Prices, Securities, Foreign exchange rates, Renminbi, China

Recommended Citation

Rong, Y. (2011). RMB exchange rate reform and cross listed stock price disparity (Master's thesis, Lingnan University, Hong Kong). Retrieved from http://dx.doi.org/10.14793/econ_etd.6

Included in

Economics Commons

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