1,190 research outputs found

    Persistence Characteristics of the Chinese Stock Markets

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    This paper identifies such fundamental characteristics as the lack of ergodicity, stationarity, and independence, and it identifies the degree of initial persistence of the Chinese stock markets when they were more regulated. The index series are from the Shanghai (SHI) stock market and Shenzhen A-shares (SZI) and B-shares (SZBI) stock markets, before and after the various deregulations and reregulations. Accurate and complete signal processing methods are applied to the complete series and to their sub-periods. The evidence of lack of stationarity and ergodicity can be ascribed to two causes: (1) the initial interventions in these stock markets by the Chinese government by imposing various daily price change limits, and (2) the changing trading styles in the course of the development of these emerging stock markets, after the Chinese government left these equity markets to develop by themselves. By computing the markets' monofractal Hurst exponents (and its accuracy range with a new statistic), using wavelet multiresolution analysis (MRA), we identify the markets' subsequent degrees of persistence. The empirical evidence shows that SHI, SZI, and SZBI are moderately persistent with Hurst exponents slightly greater than the Fickian 0.5 of the Geometric Brownian Motion. It also shows that these stock markets were considerably more persistent before the deregulations, but that they now move much more like geometric Brownian motions, i.e., efficiently. Our results also show that the Chinese stock markets are gradually and properly integrating into one Chinese stock market. Our results are consistent with similar empirical findings from Latin American, European, and other Asian emerging financial markets.Long-term dependence, degrees of persistence, Hurst exponent, wavelet multiresolution analysis, Chinese equity markets

    Do Foreign Institutional Investors Destabilize China’s A-Share Markets?

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    This paper investigates the eect of foreign institutional investors on the sta- bility of Chinese stock markets. Previous literature views this investor group as destabilizing feedback traders. We use the abolition of ownership restrictions on A shares as a natural experiment. There is strong evidence that foreign in- stitutions have a stabilizing eect on Chinese stock markets and contribute to market eciency. This nding is robust across exchanges, sample periods, size quintiles and alternative model specications. By contrast, domestic investors appear to engage in positive feedback trading. Our results have important implications for market regulation.Foreign Institutional Investors, Feedback Trading, Chinese Stock Markets, Regulation, Ownership Restrictions

    China Financial Research: A Review and Synthesis

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    We review the financial research on China as a transitional economy over the past fifteen years or so. This review sheds light on several important issues that are pertinent for an emerging financial market - how regulation can affect the prices of different financial assets; how and why markets are segmented; corporate governance effects between major and minor shareholders in an emerging market; the importance of a bank-based financial system; interactions between the financial market and the goods market; how market participants can complete the market; and how an emerging financial market emulates established markets and evolves over time. Many unexplored financial issues remain unexplored, and more research is warranted into, what theories are at work, and what are missing

    The Relationship between Social Responsibility and Majority Shareholders’ Stock Selling: Considering the Mediation of Investors Tendency

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    Based on the research object of majority shareholders’ stock selling at the post period of equity division reform, this paper takes 8019 A-share listed companies in Shanghai and Shenzhen stock market from 2007-2013 as sample, empirically analysis the relationship between social responsibility and majority shareholders’ stock selling, and consider mediation effect of the investor tendency. The study found that from the point of internal governance effect, the better of social responsibility, the lower possibility of majority shareholders’ stock selling. At the same time, the lower of market reduction premium, the lower possibility of majority shareholders’ stock selling, after considering the influence of investors’ tendency, the inhibition effect of social responsibility will be magnified, which means securities market identity with the inhibition effect that comes from the social responsibility caused by listed companies’ internal. Further study found that majority shareholders will avoid stock selling during the period of the social responsibility reporting, and market investors will hold different attitudes toward majority shareholders for their first and continuous stock selling, and on their view, continuous stock selling is a “bad” event

    Financial Distress in Chinese Industry:Microeconomic, Macroeconomic and Institutional Infuences

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    We study the impact of both microeconomic factors and the macroeconomy on the financial distress of Chinese listed companies over a period of massive economic transition, 1995 to 2006. Based on an economic model of financial distress under the institutional setting of state protection against exit, and using our own firm-level measure of distress, we find important impacts of firm characteristics, macroeconomic instability and institutional factors on the hazard rate of financial distress. The results are robust to unobserved heterogeneity at the firm level, as well as those shared by firms in similar macroeconomic founding conditions. Comparison with related studies for other economies highlights important policy implications

    Financial Distress in Chinese Industry:Microeconomic, Macroeconomic and Institutional Influences

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    We study the impact of both microeconomic factors and the macroeconomy on the financial distress of Chinese listed companies over a period of massive economic transition, 1995 to 2006. Based on an economic model of financial distress under the institutional setting of state protection against exit, and using our own firm-level measure of distress, we find important impacts of firm characteristics, macroeconomic instability and institutional factors on the hazard rate of financial distress. The results are robust to unobserved heterogeneity at the firm level, as well as those shared by firms in similar macroeconomic founding conditions. Comparison with related studies for other economies highlights important policy implications

    Asset Pricing in China: Evidence from the Shanghai Stock Exchange

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    Capital market theory is concerned with the equilibrium relationship between risk and expected return on financial claims. Within this framework, this paper seeks to extend the mounting evidence against the view that the beta coefficient of the Capital Asset Pricing Model is the sole measure of risk. In this paper we test the multifactor approach to asset pricing in one of the most challenging international markets, the Shanghai Stock Exchange, China. Firstly, we seek to determine whether size and value premia exist in China. Secondly, we address the challenge that size and value premia are largely determined by seasonal factors (such as the January and/or Chinese New Year effect). Our findings suggest that mean-variance efficient investors in China can select some combination of small and low book-to-market equity firms in addition to the market portfolio to generate superior risk-adjusted returns. Moreover, we find no evidence to support the view that seasonal effects explain the findings of the multifactor model. In summary, we suggest the market factor alone is not sufficient to describe the cross-section of average stock returns in China.Asset Pricing; Seasonal Effects; China.

    The impact of executive incentives on detection of investment opportunities and performance: the case of Chinese listed companies

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    Since the reform and opening up in 1978, China has realized a significant transition from a centrally planned to a market economy. The reform of the income distribution system is of great significance for promoting this transformation. For private enterprises as its mainstay, the market valuation and the stock performance depend largely on the future investment opportunities of the enterprises, and whether they can grasp investment opportunities and create new growth opportunities in the future is highly dependent on the decision-making ability of their executives. The existing research on the incentive effect of corporate executives mainly focuses on the evaluation of business performance based on financial indicators and there still is a lack of more in-depth examination of the effect of executives grasping and creating investment opportunities, which is key to the incentive for corporate executives. Based on the definition of related concepts and literature review, this thesis analyzes 2,533 non-financial A-share listed companies in Shanghai and Shenzhen stock markets from 2004 to 2013. Through descriptive statistics and Fama-Macbeth cross-sectional two-step regression method it first tests the regulating effect of investment opportunities on the returnvolatility relationship, and then two types of executive incentives, i.e. equity-based incentive and cash-based incentive, by comparing the regulating effect of investment opportunities with or without incentives, and under different incentive strengths. The results show that, consistent with the existing empirical results, the change of individual stock volatility has a significant positive relationship with the stock return, and this positive relationship is more obvious in enterprises with more future investment opportunities. Further, the results obtained by grouping the method of executive incentives and the incentive strength show that the higher the strength of executive incentives (especially equity-based incentives) is, the more obvious the role of investment opportunities is in strengthening the positive relationship between volatility of individual stocks and stock returns. It is showed that executive incentives can help companies grasp or create more investment opportunities, and thus allow capital market valuation of investment opportunities to be reflected by the relationship between the changes in individual stock volatility and stock returns. The research results not only provide a new test for the impact of executive incentives on capital market valuation, however also point out that the grasp and creation of investment opportunities is the key to implementing equity-based incentives among executives.Desde a reforma e abertura de 1978, a China fez uma significativa transformação de uma economia planificada para uma economia de mercado. A reforma do sistema de distribuição de rendimento tem um grande significado na promoção desta transformação. Sendo as empresas privadas o principal esteio da economia de mercado, a valorização e o desempenho das ações dependem essencialmente das oportunidades de investimento futuras e da capacidade de explorar e criar novas oportunidades no futuro, o que é altamente dependente da capacidade de decisão dos seus gestores. A investigação atual sobre o efeito dos incentivos dos gestores foca-se essencialmente na avaliação do desempenho financeiro baseado em indicadores financeiros. Existe uma lacuna na investigação do efeito da capacidade dos gestores em compreender e criar oportunidades de investimento, o que deve ser um elemento chave para os incentivos dos gestores. Com base na definição dos conceitos relacionados e na revisão da literatura, este estudo analisa 2.533 empresas cotadas tipo A, não financeiras, registadas nas bolsas de Shanghai e Shenzhen, entre 2004 e 2013, através de estatística descritiva e do método de regressão em duas etapas de Fama-Macbeth. Começa por testar o efeito regulador das oportunidades de investimento na relação entre rendibilidade e volatilidade e, a seguir, analisa os incentivos baseados na posse de ações e na remuneração em dinheiro, comparando o efeito regulador das oportunidades de investimento com e sem incentivos e sob diferentes níveis dos incentivos. Os resultados mostram que, à semelhança de anteriores estudos empíricos, a mudança de volatilidade de ações individuais tem uma relação positiva e significativa com a rendibilidade e esta relação é mais intensa para empresas com maiores oportunidades de investimento futuras. Para além disso, os resultados obtidos agrupando o método de incentivos e a sua intensidade, mostram que, quanto maior o peso dos incentivos (especialmente os baseados na posse de ações) maior o impacto das oportunidades de investimento no reforço da relação positiva entre volatilidade e rendibilidade. Verifica-se que os incentivos dos gestores ajudam as empresas a identificar e criar maiores oportunidades de investimento, permitindo assim que as avaliações pelo mercado das oportunidades de investimento se reflitam na relação entre volatilidade e rendibilidade das ações. Os resultados desta investigação fornecem um novo teste do impacto dos incentivos dos gestores na valorização do mercado de capitais, confirmando também que a identificação e criação de oportunidades de investimento são essenciais para a implementação de incentivos baseados na posse de ações pelos gestores

    The Effects of Fundamentals, Speculation, Government Policies, and International Capital Flows on China\u27s Stock Market

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    This paper, based on the relationship between the economy, policy and the financial market seeks to explore the leading force in China\u27s stock market and identify how the government policies affect the stock market, through an analysis of the performance of the Shanghai Stock Exchange Index over the past 10 years. Comparing the stocks\u27 intrinsic value to their market price can present an aerial view of China\u27s stock market. When the market prices deviated from fundamentals, we can find what government did to respond to the market and lead market opinions. Through our estimation, comparing the sample fundamental prices with the sample market prices, the market prices are consistent with fundamentals, besides the boom and bust in 2008 and 2015. Beyond fundamentals, we also looked at another three determinants of stocks\u27 prices: speculation, government intervention through policy or open market trading, and the capital flows or international hot money. Our main finding is that fundamentals are still a core determinant in China\u27s Stock Market

    One fundamental and two taxes: when does a Tobin tax reduce financial price volatility?

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    We aim to make two contributions to the literature on the effects of transaction costs on financial price volatility. First, by augmenting a double differencing approach with a research design with three ingredients (a common set of companies simultaneously listed on two stock exchanges, binding capital controls, and different timing of changes in transaction costs), we obtain a control group that has identical corporate fundamentals as the treatment group. We apply the research design to Chinese stocks that are cross-listed in Hong Kong and Mainland China. Second, we allow transaction costs to have different effects in markets with different maturity. We find a significantly negative relationship, on average, between stamp duty increase and price volatility. However, this average effect masks some important heterogeneity. In particular, when institutional investors have become a significant part of the traders’ pool, we find an opposite effect. Overall, our results suggest that a Tobin tax could work in an immature market, but can backfire in a more developed market
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