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JOURNAL OF ACCOUNTING AND FINANCE
The Role of Liquidity in International Cross-Listing Effects:
The Case of Chinese H and N Shares
Author(s): Peihwang Wei, Bei Zeng
Citation: Peihwang Wei, Bei Zeng, (2011) "The Role of Liquidity in International Cross-Listing Effects: The Case of Chinese H and N Shares" Vol. 11, Iss. 3, pp. 65 - 74
Article Type: Research paper
Publisher: North American Business Press
Abstract:
This study analyzes the role of liquidity in cross-listing and examines the causality between liquidity and price disparity for Chinese stocks traded in both Hong Kong (H shares) and New York (N shares). The advantage of analyzing the same set of stocks in two liquid markets is that it reduces effects of other confounding factors. Liquidity generally improves after listing for the H share market. The H shares have higher liquidity and lower short-term returns. Causality between price disparity and liquidity runs both ways, consistent with our expectation. The Hong Kong market is more active in response to arbitrage opportunities.
