TY - JOUR
T1 - Stock market efficiency in China
T2 - Evidence from the split-share reform
AU - Beltratti, Andrea
AU - Bortolotti, Bernardo
AU - Caccavaio, Marianna
N1 - Funding Information:
We thank Centro Paolo Baffi and Fondazione ENI Enrico Mattei for financial support. The paper received the “Best paper award” from the Chinese Finance Association in 2007. We thank Takeshi Inoue of Nomura Institute of Capital Research for kindly providing us with some of the data and seminar participants at Bank of Italy, Bocconi University, Catholic University of Milan, Fondazione ENI Enrico Mattei, University of Rome, the 13th Chinese Finance Association Conference held at Columbia University, the 5th China International Conference held at Chengdu, the 2007 meeting of the European Financial management Association, the 2007 meeting of the European Economic Association. Paolo Colla, Eric Girardin, Takeshi Jingu, Fabio Panetta and Xiaozu Wang provided comments on previous versions of this paper.
Publisher Copyright:
© 2015 The Board of Trustees of the University of Illinois.
PY - 2016/5/1
Y1 - 2016/5/1
N2 - We perform an event study to investigate the efficiency of the Chinese stock market. We study the reaction of stock returns and trading volumes to the 2005-2006 structural reform which allowed the transformation of non-tradable shares (NTS) into tradable shares (TS) through payment of a compensation to holders of TS. We find evidence of positive abnormal returns in the few days before announcement of which companies will undergo the reform process, that can be explained by information leakage and not by a compensation risk premium, and in the ten days after the readmission to trading of participating companies following the determination of the compensation, which is consistent with a Merton visibility effect. We use a bootstrap procedure designed to replicate the actual degree of covariance across firms.
AB - We perform an event study to investigate the efficiency of the Chinese stock market. We study the reaction of stock returns and trading volumes to the 2005-2006 structural reform which allowed the transformation of non-tradable shares (NTS) into tradable shares (TS) through payment of a compensation to holders of TS. We find evidence of positive abnormal returns in the few days before announcement of which companies will undergo the reform process, that can be explained by information leakage and not by a compensation risk premium, and in the ten days after the readmission to trading of participating companies following the determination of the compensation, which is consistent with a Merton visibility effect. We use a bootstrap procedure designed to replicate the actual degree of covariance across firms.
KW - Bootstrap
KW - Chinese stock market
KW - Event study
KW - Market efficiency
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U2 - 10.1016/j.qref.2015.11.002
DO - 10.1016/j.qref.2015.11.002
M3 - Article
AN - SCOPUS:84950125113
SN - 1062-9769
VL - 60
SP - 125
EP - 137
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
ER -