The dynamics of price discovery for cross-listed stocks evidence from US and Chinese markets

Figures & data

Figure 1. Trading hours for SSE and NYSE.

Table 1. Summary statistics of the Chinese cross-listed stocks in NYSE and SSE

	Mean
	Prices	Returns	Trading volume	Bid–ask spread
Aluminium Corporation of China
SSE	11.27	−0.0007	37,468.4	0.0139
NYSE	20.57	−0.0007	666.24	0.0508
China Eastern Airlines
SSE	5.30	0.0001	22,333.31	0.0288
NYSE	17.47	0.0024	37.68	0.1070
China Life Insurance
SSE	24.52	−0.0001	21,189.62	0.0170
NYSE	17.33	0.0001	2541.78	0.0261
China Petroleum & Chemical
SSE	6.57	0.0003	88,769.65	0.0119
NYSE	68.42	0.0004	404.74	0.0864
China Southern Airlines
SSE	5.16	0.0001	46,931.42	0.0365
NYSE	19.45	0.0002	68.74	0.0794
Guangshen Railway
SSE	4.37	−0.0001	42,668.01	0.0172
NYSE	22.67	−0.0001	45.83	0.1100
Huaneng Power International
SSE	7.01	0.0001	16,894.09	0.0117
NYSE	31.08	0.0002	185.32	0.0872
Sinopec Shanghai Petrochemical
SSE	5.42	0.0001	24,036.87	0.0454
NYSE	27.78	0.0001	49.58	0.1100
Yanzhou Coal Mining
SSE	15.55	0.0002	12,921.14	0.0127
NYSE	14.94	−0.00002	353.02	0.0495

Notes: This table reports the mean of prices, trading volume, and bid–ask spread of the stocks listed in both Shanghai and New York Stock Exchanges. SSE = Shanghai Stock Exchange; NYSE = New York Stock Exchange. Prices are recorded in local currencies. Returns are the first difference of the logarithmic prices.

Figure 2. Price plot for Aluminium Corporation of China Ltd. (ACH).

Figure 3. Price plot for China Eastern Airlines Corporation Limited.

Figure 4. Price plot for China Life Insurance Company Limited.

Figure 5. Price plot for China Petroleum & Chemical Corporation.

Figure 6. Price plot for China Southern Airlines Company Limited.

Figure 7. Price plot for Guangshen Railway Co. Ltd.

Figure 8. Price plot for Huaneng Power International Inc.

Figure 9. Price plot for Sinopec Shanghai Petrochemical Company Limited (SHI).

Figure 10. Price plot for Yanzhou Coal Mining Co. Ltd. (YZC).

Table 2. Unit root tests

	ADF		PP
	Prices	Returns	Prices	Returns
Aluminum Corporation of China
SSE	−1.411	−19.478^***	−1.527	−42.880^***
NYSE	−1.907	−9.741^***	−1.837	−46.940^***
China Eastern Airlines
SSE	−1.604	−18.502^***	−1.599	−45.057^***
NYSE	−1.843	−11.091^***	−1.957	−52.552^***
China Life Insurance
SSE	−1.612	−45.964^***	−1.661	−45.988^***
NYSE	−1.917	−51.451^***	−1.941	−51.507^***
China Petroleum & Chemical
SSE	−1.975	−18.895^***	−1.899	−50.833^***
NYSE	−2.771	−11.629^***	−2.620	−58.225^***
China Southern Airlines
SSE	−1.437	−13.655^***	−1.401	−47.096^***
NYSE	−1.796	−13.011^***	−1.978	−53.548^***
Guangshen Railway
SSE	−1.487	−48.363^***	−1.430	−48.396^***
NYSE	−2.183	−50.184^***	−2.120	−50.622^***
Huaneng Power International
SSE	−2.060	−12.690^***	−2.027	−49.507^***
NYSE	−1.351	−11.732^***	−1.798	−56.492^***
Sinopec Shanghai Petrochemical
SSE	−1.897	−46.308^***	−1.846	−46.192^***
NYSE	−2.382	−55.650^***	−2.390	−55.962^***
Yanzhou Coal Mining
SSE	−1.604	−48.864^***	−1.638	−48.838^***
NYSE	−1.567	−51.065^***	−1.504	−51.112^***

Notes: This table reports the unit-root tests on prices and returns of the cross-listed stocks. Test statistics of Augmented Dickey Fuller (ADF) test and Phillip Perron (PP) test are shown in the table. Returns are calculated as the first difference of logarithmic prices. The original US prices are transformed by multiplying daily exchange rate. ADF, Augmented Dickey Fuller; PP, Phillip Perron; NYSE, New York Stock Exchange; SSE, Shanghai Stock Exchange.

^*** Significance at 1% level.

Table 3. Johansen co-integration test

Firms	Rank	Trace statistic	5% Critical value
Aluminium Corporation of China
	0	24.75	20.26
	1	4.24	9.16
China Eastern Airlines
	0	2.77	12.32
	1	0.02	4.13
China Life Insurance
	0	5.13	12.32
	1	0.01	4.13
China Petroleum & Chemical
	0	4.42	12.32
	1	0.01	4.13
China Southern Airlines
	0	2.25	12.32
	1	6.21 × 10^−4	4.13
Guangshen Railway
	0	3.17	12.32
	1	0.09	4.13
Huaneng Power International
	0	7.78	12.32
	1	0.01	4.13
Sinopec Shanghai Petrochemical
	0	5.48	12.32
	1	0.10	4.13
Yanzhou Coal Mining
	0	4.39	12.32
	1	0.19	4.13

Notes: This table reports results of the Johansen co-integration test on the selected cross-listed stocks. Rank 0 and 1 stand for the null hypotheses that there is no co-integration relationship between the Shanghai and New York stock markets and there is one co-integration relationship between the two markets, respectively. Trace statistics and critical values at the 5% significance level are shown.

Table 4. The error correction coefficients, information share and common factor measure of Aluminium Corporation of China Limited

Panel A: Error correction coefficients
α1	−0.009^**
	(-2.54)
α2	0.012^***
	(2.73)
Panel B: Hasbrouck information share
NYSE: Upper bound	0.682
SSE: Lower bound	0.367
NYSE: Upper bound	0.633
SSE: Lower bound	0.318
Panel C: PT/GG measure
SSE	0.576
NYSE	0.424

Notes: This table shows estimates of the error correction coefficients of Equation (1), information share and PT/GG measure for Aluminium Corporation of China Ltd listed in both Shanghai and New York stock exchanges. PT/GG, Gonzalo–Granger permanent–temporary measure. Figures in parenthesis are t-statistics.

^** Significance at 5% level.

^*** Significance at 1% level.

Table 5. Granger causality on VARs

Firms	NYSE → SSE	SSE → NYSE
Aluminum Corporation of China	YES	YES
	114.74^***	27.62^**
China Eastern Airlines	YES	YES
	60.95^***	30.48^***
China Life Insurance	YES	YES
	114.22^***	77.92^***
China Petroleum & Chemical	YES	YES
	114.80^***	60.87^***
China Southern Airlines	YES	YES
	82.31^***	34.04^***
Guangshen Railway	YES	YES
	35.85^***	39.66^***
Huaneng Power International	YES	NO
	72.42^***	22.22
Sinopec Shanghai Petrochemical	YES	NO
	18.61^***	1.18
Yanzhou Coal Mining	YES	YES
	95.92^***	41.22^**

Notes: This table shows the results of the Granger causality test on the cross-listed stocks in both the Shanghai and New York stock exchanges. NYSE → SSE denotes causality from NYSE to SSE while SSE → NYSE denotes causality from SSE to NYSE. YES means causality exists while NO means causality does not exist. The causality is tested by testing the null hypotheses established in Section 3.4. ${\mathit{\chi }}_{}^2(p)$ test statistics for the hypothesis testing are reported. p is the degree of freedom that equals to the optimal lags of the underlying VAR in Equation (1). The optimal lags are selected by AIC.

^* Significance at 10% level.

^** Significance at 5% level.

^*** Significance at 1% level.

Table 6. Bivariate DCC-EGARCH model

Coef.	Aluminium Corporation of China	China Eastern Airlines	China Life Insurance	China Petroleum & Chemical	China Southern Airlines	Guangshen Railway	Huaneng Power International	Sinopec Shanghai Petrochemical	Yanzhou Coal Mining
α1	−0.623^***	−0.761^***	−0.148^***	−0.328^***	−0.275^***	−0.202^***	−0.148^***	−0.761^***	−0.312^***
	(-9.60)	(-15.46)	(-23.17)	(-15.78)	-(14.71)	(-18.06)	(-36.54)	-(13.90)	-(14.89)
α2	0.209^***	0.488^***	0.132^***	0.154^***	0.253^***	0.164^***	0.125^***	0.220^***	0.191^***
	(9.81)	(12.16)	(9.27)	(10.84)	(15.50)	(8.98)	(51.31)	(17.30)	(17.18)
α3	0.012	−0.075^**	0.006	0.055^***	0.003	0.022	0.026^***	0.084^***	0.013
	(0.88)	(-2.29)	(0.40)	(5.01)	(0.29)	(1.56)	(3.07)	(6.59)	(1.39)
α4	0.952^***	0.938^***	1.006^***	0.988^***	1.004^***	1.004^***	1.005^***	0.937^***	0.991^***
	(130.88)	(199.57)	(693.11)	(383.44)	(383.70)	(442.43)	(1.37 × 10^5)	(142.86)	(330.81)
α5	0.068^***	0.250^***	0.100^***	0.102^***	0.099^***	0.100^***	0.110^***	0.100^***	0.100^***
	(3.32)	(7.93)	(18.38)	(8.29)	(10.08)	(10.44)	(31.16)	(7.66)	(8.99)
β1	−0.408^***	−0.223^***	−0.169^***	−0.319^***	−0.179^***	−0.201^***	−0.157^***	−0.247^***	−0.204^***
	(-11.05)	-(15.43)	(-23.41)	(-15.15)	-(21.25)	(-19.20)	(-37.87)	-(13.87)	-(16.60)
β2	0.148^***	0.178^***	0.138^***	0.163^***	0.137^***	0.143^***	0.134^***	0.170^***	0.151^***
	(8.33)	(13.00)	(19.18)	(15.60)	(25.12)	(17.28)	(36.37)	(14.18)	(13.50)
β3	−0.022^**	−0.104^***	−0.024^***	−0.002	−0.003	−0.022^***	−0.001	−0.004	−0.025^***
	(-2.03)	-(6.85)	(-6.22)	-(0.43)	-(0.75)	(-5.47)	(-0.53)	-(0.47)	-(3.14)
β4	0.971^***	0.986^***	1.005^***	0.990^***	1.004^***	1.002^***	1.005^***	0.992^***	0.995^***
	(250.18)	(602.55)	(728.74)	(411.27)	(764.77)	(549.85)	(1.93 × 10^6)	(428.53)	(499.89)
β5	0.065^***	0.111^***	0.060^***	0.062^***	0.049^***	0.040^***	0.100^***	0.050^***	0.050^***
	(4.27)	(10.11)	(19.42)	(6.97)	(11.15)	(10.46)	(153.13)	(7.44)	(9.14)
a	0.021^*	0.080^***	0.100^*	0.080^***	0.101^***	0.100^*	0.100^*	0.199^***	0.200^***
	(1.72)	(2.78)	(1.84)	(5.84)	(2.62)	(1.75)	(1.81)	(3.29)	(3.00)
b	0.964^***	0.904^***	0.569^***	0.912^***	0.796^***	0.534^***	0.559^***	0.678^***	0.640^***
	(62.50)	(28.98)	(3.50)	(58.67)	(17.77)	(3.42)	(3.08)	(11.08)	(10.37)
v	5.808^***	9.605^***	6.756^***	5.117^***	6.645^***	5.487^***	6.124^***	7.514^***	7.782^***
	(9.82)	(17.02)	(15.24)	(16.82)	(19.00)	(16.37)	(16.66)	(20.99)	(14.21)
LB(k)	5.345	1.006	5.606	6.703	8.702	8.920	2.988	1.731	2.695
	9.546	0.134	1.735	0.140	17.623	0.193	0.385	0.028	0.719
LB^2(k)	5.233	7.645	14.58	9.737	11.781	11.165	9.290	7.126	2.891
	6.134	7.777	4.088	16.492	1.177	14.925	5.024	14.66	15.282

Notes: This table reports the estimation results of the bivariate DCC-EGARCH model for nine cross-listed stocks in both Shanghai and New York stock exchanges. Coef. stands for coefficients. LB(k) and LB²(k) are the Ljung-Box Q statistics at order k for the standardized residuals and its squares, respectively. k = 12. Figures in parentheses are t statistics.

^* Significance at 10% level.

^** Significance at 5% level.

^*** Significance at 1% level.