Ownership Restrictions and Stock Prices: Evidence from Chinese Markets
Posted: 13 Apr 1999
In this paper, I test a one-period capital asset pricing model (CAPM) under share ownership restrictions to explain differences in prices and expected excess returns between the classes of shares that can be bought and traded by domestic and foreign investors, respectively, in the Chinese stock markets. I find that cross-sectional variability in the spread between the expected domestic and foreign share excess returns is related to differences in individual shares' market betas. The empirical results are by and large consistent with the CAPM. After the betas are controlled for, idiosyncratic variance and firm size have no effect.
JEL Classification: G12, G14
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