Work

Information Asymmetry and Asset Prices: Evidence from the China Foreign Share Discount

Year: 2008

Type: article

Abstract: ABSTRACT We examine the effect of information asymmetry on equity prices in the local A‐ and foreign B‐share market in China. We construct measures of information asymmetry based on market microstructure models, and find that they explain a significant portion of cross‐sectional variation in B‐share discounts, even after controlling for other factors. On a univariate basis, the price impact measure and the adverse selection component of the bid‐ask spread in the A‐ and B‐share markets explains 44% and 46% of the variation in B‐share discounts. On a multivariate basis, both measures are far more statistically significant than any of the control variables.

Source: The Journal of Finance

DOI: 10.1111/j.1540-6261.2008.01313.x

Authors: KALOK CHAN, ALBERT J. MENKVELD, ZHISHU YANG

Institutions: Hong Kong University of Science and Technology, Vrije Universiteit Amsterdam, Tsinghua University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3124043170

FWCI: 28.5

Cites: 49

Cited by: 397

Related to: 9