Red chips or H shares : which China-backed securities process information the fastest?

Pui Han, Winnie POON, Hung Gay FUNG

Research output: Journal PublicationsJournal Article (refereed)peer-review

36 Citations (Scopus)

Abstract

This study examines the information flow between China-backed securities, namely H shares, red chips, Shanghai and Shenzhen listed common shares. We document several findings. We find that an exponential generalized autoregressive conditional heteroscedasticity in mean (EGARCH-M) model appears to describe adequately the return process of the China-backed securities. Our empirical findings show that both H shares and red chips (which are listed in Hong Kong) are more sensitive to 'good' news than 'bad' news, while stocks listed in the China market are more sensitive to 'bad' news than 'good' news. Using a multivariate EGARCH-M model, we have found significant return and volatility spillover effects among the China-backed securities. Our study indicates that the red chips appear to spread information to other China-backed markets 'directly' or 'indirectly'. The results imply that the red chip market processes information faster than the other markets.
Original languageEnglish
Pages (from-to)315-343
Number of pages29
JournalJournal of Multinational Financial Management
Volume10
Issue number3/4
DOIs
Publication statusPublished - 1 Jan 2000

Bibliographical note

The authors wish to thank Professor Marie Sushka, Professor Myron Slovin, Professor Yiuman Tse, Professor Michael Firth, Professor Oliver Rui and an anonymous referee for their constructive comments and criticisms, which have greatly improved this paper. The authors acknowledge the editorial assistance provided by Peter Jackson of the Language Centre at Lingnan University, Hong Kong and thank Wong Hong for her research assistance. Any errors that remain are ours.

Funding

Poon is grateful for a research grant from the Research Committee of Lingnan University, Hong Kong.

Keywords

  • China-backed securities
  • EGARCH
  • Information and market efficiency

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