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Title: Foreign ownership restrictions and market segmentation in China's stock markets
Authors: Chen, GM
Lee, BS
Rui, O
Issue Date: 2001
Publisher: Wiley-Blackwell
Source: Journal of financial research, 2001, v. 24, no. 1, p. 133-156 How to cite?
Journal: Journal of financial research 
Abstract: We study market segmentation in China's stock markets, in which local firms issue two classes of shares: class A shares available only to Chinese citizens and class B shares available only to foreign citizens. Significant stock price discounts are documented for class B shares. We find that the price difference is primarily due to illiquid B-share markets. Relatively illiquid B-share stocks have a higher expected return and are priced lower to compensate investors for increased trading costs. However, between the two classes of shares, B-share prices tend to move more closely with market fundamentals than do A-share prices. Therefore, we find A-share premiums rather than B-share discounts in China's markets.
ISSN: 0270-2592 (print)
1475-6803 (online)
DOI: 10.1111/j.1475-6803.2001.tb00822.x
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