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

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  • 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.

Suggested Citation

  • Jianping Mei & Jose Scheinkman & Wei Xiong, 2005. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," NBER Working Papers 11362, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:11362
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    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • F3 - International Economics - - International Finance

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