Title: Trading Coordination and Cross-Listed Share Price Disparity
Speaker:Huanhuan Zheng, Assistant Professor,The Chinese University of Hong Kong
Host:Yu Zhang, Associate professor, RIEM
Venue:H501, Liulin Campus
Abstract: Chinese stocks that are cross-listed in Hong Kong (H share) and Shanghai Stock Exchange (A share) exhibits significant price disparity in the two markets even though. A- and H- shares are identical other than the market they are listed. We attribute the price discount of H-share over A-share price to the trading coordination in these two markets. Investors strategically consider the actions of others in the same market, and evolutionarily coordinate on informed and uninformed trading to maximize their payoff. We find that investors coordinate more on informed trading in the market that has more institutional investors, greater information transparency and higher volatility, and as a consequence, the price is lower in these scenario in the bull market.