Asset pricing, jump risk, and China's B-share discount puzzle Online publication date: Sat, 13-Sep-2014
by Haigang Zhou; John Qi Zhu
International Journal of Financial Services Management (IJFSM), Vol. 6, No. 4, 2013
Abstract: This study examines whether differential systematic risks, along with other competing explanations, account for cross-sectional variations in B-share discounts in China, using both cross-sectional and panel data analysis. Results show strong evidence that variations in A-share systematic risks are positively related to variations in B-share discount after controlling for various competing explanations. No evidence shows a correlation between variations in B-share systematic risks and variations in B-share discounts. These findings survive various robustness checks. The study further decomposes total systematic risk into continuous and jump components. Regression results indicate that variations in B-share discounts are explained mostly by variations in systematic continuous risk but not by variations in systematic jump risk.
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