Date of Award
Doctor of Philosophy (PhD)
Dr. Gerald P. Dwyer, Jr., Committee Chair
Dr. Michal M. Jerzmanowski
Dr. Sergey Mityakov
Dr. Robert F. Tamura
This dissertation examines the impact of retail trading, price limit rule and market opening on the Chinese stock market. The Chinese stock market is the second largest in the world based on market capital. In addition, it has a daily average turnover eight times of the US stock market. It also has a price limit rule which limits its daily ﬂuctuation. Furthermore, retail investors play an important role in the Chinese stock market, meaning its investor structure is diﬀerent from that of developed stock markets. In the ﬁrst chapter, I explore the impact of the breadth of ownership on stock returns and turnovers in the Chinese A share market. Using data in the period of 2002-2017, I ﬁnd that ﬁrms with a higher breadth of ownership and a higher change in the breadth of ownership have lower returns and higher average daily turnovers in the subsequent quarter. Furthermore, ﬁrms with a higher breadth of ownership have a stronger reversal eﬀect in returns and a stronger negative relationship be-tween turnovers and subsequent returns. Moreover, adding the breadth and the change of breadth factors to a six-factor model improves the explanatory power of excess returns, this improvement is mainly provided by the change of breadth factor. These ﬁndings are consistent with the hypothesis that retail investors are attention-motivated traders and their trading behavior causes overreaction and mispricing in the Chinese stock market. In the second chapter, I explore the impact of the Chinese price limit policy on long-term stock performance using IPOs on the A share market and HKEx market from 2006 to 2015. I use a diﬀerence-in-diﬀerences method to investigate whether a new IPO policy for the A share market causing consecutive limit-ups on the ﬁrst several trading days after the IPO has a long-term eﬀect on stock return, turnover, volatility and β coeﬃcient. The empirical results are consistent with the hypothesis that this price limit policy causes the IPO ﬁrms on the A share market to have higher stock returns, turnovers, volatility and β coeﬃcients over a 2-years period after the IPO. In the last chapter, I explore the inﬂuence of Hong Kong investors on stock returns and turnovers of stocks involved in the Shanghai-Hong Kong Stock Connect policy. Using data from 2014-2016 in the Chinese stock market, I ﬁnd that stocks dual-listed in Shanghai and Hong Kong have higher monthly stock returns than stocks involved in the Shanghai-Hong Kong stock connect but listed only in Shanghai; however, the diﬀerence in stock returns between the dual-listed and other Shanghai Hong Kong stock connect involved stocks decreases gradually. Moreover, stocks dual-listed in Shanghai and Hong Kong have higher daily average turnovers than stocks involved in the Shanghai-Hong Kong stock connect but listed only in Shanghai, and the dif-ference in daily average turnover between dual-listed and other Shanghai-Hong Kong stock connect involved stocks decreases gradually. These empirical results are consis-tent with the hypothesis that Hong Kong investors were initially more likely to buy Shanghai-Hong Kong dual-listed stocks through the stock connect channel; however, they extended their investment target to stocks involved in the stock connect but listed only in Shanghai after they gained experience and became familiar with the Shanghai stock market.
Cheng, Yuekai, "Three Essays on an Emerging Financial Market" (2018). All Dissertations. 2160.