Working Paper: NBER ID: w11362
Authors: Jianping Mei; Jose Scheinkman; Wei Xiong
Abstract: The market dynamics of technology stocks in the late nineties has stimulated a growing body of theories that analyze the joint effects of short-sales constraints and heterogeneous beliefs on stock prices and trading volume. This paper examines implications of these theories using a unique data sample from China, a market with stringent short-sales constraints and perfectly segmented dual-class shares. The identical rights of the dual-class shares allow us to control for stock fundamentals. We find that trading caused by investors' speculative motive can help explain a significant fraction of the price difference between the dual-class shares.
Keywords: Speculative Trading; Stock Prices; Chinese Market; A-B Share Premia
JEL Codes: G0; G1; F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| speculative trading (G13) | price difference between A and B shares (G19) |
| A share turnover (G34) | A-B share premium (G12) |
| asset float (G12) | share turnover (D16) |
| A share turnover (G34) | speculative trading motives (D84) |