Market liberalization within a country
Tong, Wilson H. S.
- 管理学院－已发表论文 
China's B-share markets which used to be restricted to foreign investors, was partially opened up in February 2001 to Chinese local investors. We take this as a controlled experiment in cross-border trading on a small scale. We find mild but positive effects on the B-share market, with higher volumes, lower levels of volatility, lower bid-ask spreads and more liquidity after liberalization. Between A- and B-shares, price disparities narrowed; the correlation and the co-integration relationships became stronger; and the flow of information became more balanced. More new individual investors entered into the B-share market without crowding out existing institutional investors. Even though the liberalization measure is partial and one-way, it has helped to improve the quality of the B-share market and our results lend no support to the popular claim that liberalization does nothing but help the existing foreign shareholders to cash out. (C) 2008 Elsevier B.V. All rights reserved.