An Explanation of the Volatility Disparity between the Domestic and Foreign Shares in the Chinese Stock Markets

An Explanation of the Volatility Disparity between the Domestic and Foreign Shares in the Chinese Stock Markets

Return volatility is found significantly higher for the foreign shares (B shares) than for the domestic shares (A shares) traded in the Chinese stock markets. To explain this volatility disparity, we investigate the bid–ask spreads and estimate the market-making costs (informed trading and noninform...

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Main Authors: WU, Chunchi, He, Yan
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2003
Subjects:
Volatility
Bid–ask spreads
Informed trading costs
Chinese stock markets
Business
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/836
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Institution: Singapore Management University
Language: English
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spelling sg-smu-ink.lkcsb_research-18352010-09-23T06:24:04Z An Explanation of the Volatility Disparity between the Domestic and Foreign Shares in the Chinese Stock Markets WU, Chunchi He, Yan Return volatility is found significantly higher for the foreign shares (B shares) than for the domestic shares (A shares) traded in the Chinese stock markets. To explain this volatility disparity, we investigate the bid–ask spreads and estimate the market-making costs (informed trading and noninformed trading costs) for each stock. Our results show that the B-share market in China contains higher informed trading and other market-making costs than the A-share market. When informed trading and other cost components are accounted for, the volatility disparity between the A and B shares disappears. Thus, the higher volatility in the B-share market can be attributed to the higher market-making costs faced by B-share traders. 2003-01-01T08:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/836 info:doi/10.1016/s1059-0560(03)00003-0 Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Volatility Bid–ask spreads Informed trading costs Chinese stock markets Business
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Volatility
Bid–ask spreads
Informed trading costs
Chinese stock markets
Business
spellingShingle Volatility
Bid–ask spreads
Informed trading costs
Chinese stock markets
Business
WU, Chunchi
He, Yan
An Explanation of the Volatility Disparity between the Domestic and Foreign Shares in the Chinese Stock Markets
description Return volatility is found significantly higher for the foreign shares (B shares) than for the domestic shares (A shares) traded in the Chinese stock markets. To explain this volatility disparity, we investigate the bid–ask spreads and estimate the market-making costs (informed trading and noninformed trading costs) for each stock. Our results show that the B-share market in China contains higher informed trading and other market-making costs than the A-share market. When informed trading and other cost components are accounted for, the volatility disparity between the A and B shares disappears. Thus, the higher volatility in the B-share market can be attributed to the higher market-making costs faced by B-share traders.
format text
author WU, Chunchi
He, Yan
author_facet WU, Chunchi
He, Yan
author_sort WU, Chunchi
title An Explanation of the Volatility Disparity between the Domestic and Foreign Shares in the Chinese Stock Markets
title_short An Explanation of the Volatility Disparity between the Domestic and Foreign Shares in the Chinese Stock Markets
title_full An Explanation of the Volatility Disparity between the Domestic and Foreign Shares in the Chinese Stock Markets
title_fullStr An Explanation of the Volatility Disparity between the Domestic and Foreign Shares in the Chinese Stock Markets
title_full_unstemmed An Explanation of the Volatility Disparity between the Domestic and Foreign Shares in the Chinese Stock Markets
title_sort explanation of the volatility disparity between the domestic and foreign shares in the chinese stock markets
publisher Institutional Knowledge at Singapore Management University
publishDate 2003
url https://ink.library.smu.edu.sg/lkcsb_research/836
_version_ 1770569703643676672

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