Risk-sharing, market imperfections, asset prices: Evidence from China's stock market liberalization
- Publication Type:
- Journal Article
- Journal of Banking and Finance, 2017, 84 pp. 166 - 187
- Issue Date:
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© 2017 Elsevier B.V. We examine the roles of risk-sharing and other factors in stock price revaluation during a recent liberalization episode in China. Consistent with the theoretical prediction that liberalizations reduce systematic risk, we find that risk-sharing explains approximately one-fourth of the price revaluation of investible stocks during the eight-month window between reform announcement and implementation. The firm-specific information generated by the reform is more efficiently priced into stocks that have a higher degree of market liquidity, information transparency, and informed trading.
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