Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia

40 Pages Posted: 26 Mar 2005

See all articles by Jianping Mei

Jianping Mei

New York University (NYU) - Department of Finance

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

José Scheinkman

Columbia University; Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

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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, equity overvaluation, Chinese stock markets

Suggested Citation

Mei, Jianping and Xiong, Wei and Scheinkman, José, Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia. AFA 2005 Philadelphia Meetings, Available at SSRN: https://ssrn.com/abstract=498024 or http://dx.doi.org/10.2139/ssrn.498024

Jianping Mei

New York University (NYU) - Department of Finance ( email )

Stern School of Business
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New York, NY 10012-1126
United States
212-998-0354 (Phone)
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Wei Xiong (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

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United States

José Scheinkman

Columbia University ( email )

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Princeton University - Department of Economics ( email )

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Princeton, NJ 08544
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609-258-6419 (Fax)

HOME PAGE: http://www.princeton.edu/~joses

National Bureau of Economic Research (NBER)

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