FLOAT, SPECULATION AND STOCK PRICE: EVIDENCE FROM THE SPLIT SHARE STRUCTURE REFORM IN CHINA

CHUAN YANG HWANG, Shaojun Zhang, YANJIAN ZHU

Research output: Journal article publicationJournal articleAcademic researchpeer-review

2 Citations (Scopus)

Abstract

After firms completed the reform, their float increased by 31% on average, while turnover and trading volume also increased substantially. We use information from firms’ reform plan to derive an estimate of the price premium of tradable shares over non-tradable shares before the reform and find that, after controlling for differences in liquidity and profitability, the price premium is significantly related to proxies for the level of speculative trading in tradable shares. Moreover, firms that were highly speculated before the reform had significantly smaller increase in turnover and trading volume than firms that were less speculated. Overall, our evidence confirms that there is a significant speculative component in the market price of tradable shares in China and a large increase in float dampens speculative trading.
Original languageEnglish
Pages (from-to)701-729
JournalSingapore Economic Review
Volume63
Issue number3
DOIs
Publication statusAccepted/In press - 1 Jan 2016

Keywords

  • Bubble
  • float
  • heterogeneous beliefs
  • speculative trading
  • split share structure reform in China

ASJC Scopus subject areas

  • Economics and Econometrics

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