Non-tradable share reform, liquidity and stock returns in China

Hung, C.-H. D. , Chen, Q. and Fang, V. (2015) Non-tradable share reform, liquidity and stock returns in China. International Review of Finance, 15(1), pp. 27-54. (doi:10.1111/irfi.12043)

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This article studies the influence of the non-tradable share reform in the cross-section of stock returns in China. Prior research has generally neglected this important development in the Chinese stock market. We find that the firm-specific illiquidity measures that reflect direct transaction costs, price impact and difficulties in trading immediacy, exhibit a positive and significant relationship with stock returns. These effects are particularly pronounced after the non-tradable share reform. Furthermore, in the post-reform era, portfolios with high illiquidity (i.e. high relative bid–ask spread, high Amihud illiquidity, low Amivest liquidity ratio) significantly outperform portfolios with low illiquidity, controlling for size, and book-to-market effects.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Hung, Dr Daniel
Authors: Hung, C.-H. D., Chen, Q., and Fang, V.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:International Review of Finance
Publisher:Wiley-Blackwell Publishing Asia
ISSN (Online):1468-2443

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