Search

This paper examines stock market integration between the five ASEAN countries and both the US and China in turn, over the period from November 2002 to August 2020. The linkages between both aggregate and financial sector stock indices (both weekly and monthly) are analyzed using fractional integration and fractional cointegration methods. Further, recursive cointegration analysis is carried out for the weekly series to study the impact of the 2007–8 global financial crisis and the 2015 China stock market crash on the pattern of stock market co-movement. The main findings are the following. All stock indices exhibit long-range dependence. There is cointegration between the five ASEAN countries and the US but almost none between the former and China, except between Indonesia and China in the case of the financial sector. The 2007–8 global financial crisis and the 2015 Chinese stock market plunge weakened the linkages between the ASEAN five and both China and the US. The implications of these results for market participants and policy makers are discussed. [ABSTRACT FROM AUTHOR]

The article discusses papers published within the issue, including one on personal taxes on dividend gains, another on the impact of foreign direct investment and short-term capital investment on stock and real estate prices in China and a paper on herding behavior in the Taiwanese stock market.

The purpose of this study is to investigate whether margin downregulations helped enhance the functions of index futures markets following the stock market crash in China in 2015. Using high-frequency trading data, we estimate the changes in the price discovery and volatility spillover relationships between the CSI 300 index and its futures. We find that reducing the margin ratio strengthens the lead role of futures in the lead-lag relationship and results in more volatility transmission from futures markets to the stock market. Furthermore, this paper shows that the expiration-day effect negatively influences the two functions. [ABSTRACT FROM AUTHOR]

This paper investigates interdependence and contagion between oil and BRIC stock markets before and after COVID-19. We used a local Gaussian correlation approach to identify the asymmetric relationship and a bootstrap method to test contagion. The empirical results show that, except for China, the linkages between the crude oil markets and BRIC stock markets significantly increased in crashing markets during the COVID-19 pandemic. Contagion is identified from crude oil markets to the Indian stock market, and from West Texas Intermediate (WTI) futures to the Russian stock market. [ABSTRACT FROM AUTHOR]

The article presents an overview of the papers included in the March 2, 2013 issue of "Emerging Markets Finance & Trade" journal including a paper which examined the impact of financial liberalization on the allocation of investment in China, a paper on the spillover effects between the U.S. and Chinese stock markets and a paper about the importance of corporate governance.

Using SZSE's disclosure rankings data, this paper studies the relation between firms' disclosure quality and stock mispricing in emerging markets. We find that higher disclosure ranking grades, the proxy for disclosure quality, is associated with less stock misvaluation in the sense that market price deviates less from its fundamental. We also investigate the variation in this relation across industries and time. Our results document that the association between disclosure ranking grades and stock misvaluation is stronger for firms in more competitive industries. This finding suggests that higher disclosure ranking grades help draw more investors' attention, which will reinforce the role of corporate disclosure in reducing stock misvaluation. In addition, increase in disclosure ranking grades is more effective in reducing stock misvaluation in years prior to China's Split Share Structure Reform (SSSR), which is consistent with our conjecture that corporate disclosure is more valuable in promoting pricing efficiency when private information collection activities are less active. [ABSTRACT FROM AUTHOR]

This paper examines the performance of three famous factor pricing models in markets of bull, bear, and consolidation in China. Empirical results show that these models explain the time-series variations in portfolio returns in bearish market reasonably well, but fail to explain the cross-sectional variations. Another two findings are revealed by instability tests. First, the three models are more unstable in trending (i.e., bearish and bullish) markets under time-series regression due to the higher stock price synchronicity. Second, greater instability causes the unitary parameter estimates less reliable and brings about difficulties in explaining the cross-sectional portfolio returns in trending markets. [ABSTRACT FROM AUTHOR]

In March 2010, the China Securities Regulatory Commission (CSRC) launched a reform introducing both margin trading and short selling into China's stock market. This paper examines the impact of this reform on corporate outcomes in the short run and long run. In our analysis, we adopt a generalized propensity score (GPS) matching method that allows treatment effects to change over time. Our empirical results not only indicate that the reform positively bolstered stock trading activities, but also constrained managers' behavior, such as their method of earnings management. We think that disclosure policies adopted by managers can influence stock trading activities. This study has several important implications that policymakers might find useful. We provide evidence supporting the CSRC to allow more firms to join the reform. [ABSTRACT FROM AUTHOR]

This paper digests the influences of financial transparency and media coverage in the Chinese stock market. In China, media performs under a regulatory system and media information is regarded as the direction of news. In addition, the Chinese market is dominated by retail investors and financial information is always manipulated, so the reliability of financial information is quite intriguing. The effect of ostensible financial information on the stock market through the media hype is a crucial issue. We employ media and transparency to analyze over 3,000 stocks in China. First of all, the Chinese stock market is characterized by significantly negative momentum profit and thus exhibits price reversal. However, when high media coverage and high transparency jointly come into play, the significantly negative momentum profit turns to be significantly positive. This dramatic change alters the price reversal to be price momentum. By contrast, low media coverage and low transparency still result in price reversal. [ABSTRACT FROM AUTHOR]

In this paper, we investigate the impact of downside risk in the oil market on the expected stock returns in China's A-share market, and find that downside risk positively influences the expected stock returns. This positive influence remains after controlling for various control variables. It is also robust under different stock market conditions and the financial crisis, and with high-frequency data as an alternative measure of downside risk. In addition, the positive relation is consistent across industries regardless of whether they are directly related to natural resources or only indirectly related to oil. We also find evidence of nonlinearity in the relation between the oil and stock markets. The positive relation can be explained by the global risk aversion of investors who are averse to downside risk in the oil market and thus demand compensation in the form of higher expected returns for holding stocks. [ABSTRACT FROM AUTHOR]

We analyze the companies listed on stock exchanges in China from 2004 to 2009 and discover that firms' political connections help them obtain bank lines of credit, especially from state-owned banks. The results also show that political connections have a stronger effect on the acquisition of bank lines of credit for firms that face more financing constraints, are not owned by the state, or are located in regions with intensive government intervention. This paper deepens the field's understanding not only of bank lines of credit but also of the role that political connections play in firms' financing activities. [ABSTRACT FROM AUTHOR]

There is an urgent need to understand the spillover and cojump effects between the U.S. and Chinese stock markets. The paper finds that since July 2005, the U.S. stock market has caused short-run spillover effects on returns on the Chinese stock market. More specifically, price changes in the United States can be used to predict both closing-to-opening and closing-to-closing returns on the Chinese stock market on the next day. However, there is no significant volatility spillover between the two markets. Both markets have shown stronger cojump behavior since the subprime crisis. The return relationships between the two stock markets are robust. [ABSTRACT FROM AUTHOR]

China's unique split-share structure has resulted in serious agency problems. Moreover, the literature has shown that free cash flow and overinvestment problems are common in China's listed firms. This paper investigates the impact of the split-share structure reform on agency problems. The paper finds a decrease in investment-cash flow sensitivity after the reform of the split-share structure, which is evidence for a decrease in agency problems in China's listed firms after this reform. The result implies that the split-share structure reform has eased the agency problems in China's listed firms. [ABSTRACT FROM AUTHOR]

Because of asymmetric information between issuing companies and investors, media coverage plays an important role in conveying information to investors during an initial public offering (IPO). The stock price is affected by a large amount of information released to the public through media coverage. Using a comprehensive sample of 1,075 IPOs on China's stock market from 2009 to 2016, this paper conducts a textual analysis to determine the tone of media coverage and examines the relationship between media tone and IPO underpricing as well as post-IPO volatility. The empirical results show that media coverage during an IPO is significantly negatively associated with IPO underpricing, which confirms our hypothesis that the tone of media coverage reduces the degree of information asymmetry between investors and issuers, regardless of whether the tone is positive or negative. Consistent with prospect theory, investors are more sensitive to media coverage with a negative tone. [ABSTRACT FROM AUTHOR]

The process of opening the Chinese stock market has sped up in the last two decades. This paper investigates the effects of the uncertainty in the US measured by news-implied volatility on the Chinese stock market volatility. Our empirical results for the full sample period (1997–2016) reveal that there is no clear effect of US uncertainty on fluctuations in China's stock market. However, based on the subsample analysis along the opening progress in the Chinese stock market, we observe that US uncertainty had a significant effect on Chinese stock market volatility after Qualified Foreign Institutional Investors (QFII) and Renminbi QFII were allowed to invest in the Chinese stock market. The results are the same after the global financial crisis. Our results imply that the US uncertainty should be considered by investors deciding on investment strategy. The government should also consider the US uncertainty when enacting the policy on opening policy the Chinese stock market. [ABSTRACT FROM AUTHOR]

This paper decomposes stock volatility into a market-driven component and an idiosyncratic component using the generalized dynamic factor model and then investigates the influence of media coverage on them. Based on the Baidu Media Index and composite stock data in the CSI 300 Index, we found that the influence of media coverage on market-driven volatility appears to be U-shaped, but the influence on idiosyncratic volatility is negative. Our results show that, in China, the news media generally play a role as information providers on the stock market. However, when the stock market is in a volatile period, media coverage exacerbates that volatility. [ABSTRACT FROM AUTHOR]

This paper uses a wavelet approach to examine the relationship between gold prices and the Chinese stock market over the past quarter-century. Our empirical study with weekly data shows that gold cannot be used as a short-term hedging tool in China in the full sample period, but it can be used as a long-term hedging tool in the sample period after 2005, concurrent with changes in Chinese government policy. This conclusion also emerges when weekly data are replaced by monthly or daily data. However, similar changes in the long-term hedging ability of gold are not observed in the UK and the US. Thus, this change in the ability of gold to serve as a hedge in China can probably be attributed to shifts in some important market policies, such as the reform in nontradable shares in the Chinese capital market and the exchange rate reform in 2005. [ABSTRACT FROM AUTHOR]

This paper investigates the dynamic dependence structure between the Chinese stock market and the real exchange rate of the Chinese renminbi (RMB) with unconditional and conditional copula models for the period July 22, 2005, to December 31, 2017. The results show that the crisis induced significant structural breaks, and the relationship is weak before the global financial crisis but substantially stronger after the financial crisis, regardless of whether the correlation is positive or negative. Our findings have important implications for global portfolio diversification, risk management, and China's exchange rate policy. [ABSTRACT FROM AUTHOR]

We develop a valuation model of companies under financing constraints and investment time lags. Moreover, we investigate the specific time lag effect of investment on company value through Panel-VAR models using data from 622 companies listed on the Shanghai and Shenzhen stock exchanges in China from 2011–2019. The impact of cash flow and debt financing cost on company value is also dissected. The results indicate a one-period time lag effect for the investment. Cash flow is more valuable to finance-constrained companies than to non-financing constrained companies. The debt financing costs of finance-constrained companies is positively related to company value. [ABSTRACT FROM AUTHOR]

This paper seeks to explore the relationship among the large declines in China’s stock market and stock markets in the United States, the United Kingdom, Japan, and Hong Kong, and to forecast future large declines in China’s stock market. We apply mutually exciting marked Hawkes processes—where the occurrences of large declines are regarded as events whose magnitudes follow generalized Pareto distributions—to study the interaction between the different stock markets. We find that these interactions are asymmetric. The occurrences of large declines in the Chinese stock market will stimulate declines in the United States and the United Kingdom, and especially in Japan’s and Hong Kong’s stock markets. However, only large declines in Hong Kong’s market have a substantial influence on the occurrence of big declines in China’s market. Finally, we try to predict the time of occurrence of the next major decline in China’s stock market using information from our empirical results. [ABSTRACT FROM PUBLISHER]

The main goal of this paper is to study the relationship between oil price shocks and mainland China’s stock market. From empirical study, we have found that the impact of oil price shocks on stock prices in China has been mixed. In contrast to the conventional wisdom that higher oil prices may cause lower stock prices, positive shocks to oil-market-specific demand resulted in both higher real oil prices and higher stock prices, which helps explain the boom of the Chinese stock market as oil prices were increasing in 2007. However, global oil demand and supply shocks had no significant effects. [ABSTRACT FROM PUBLISHER]

China's economy has maintained a rapid growth rate over the past two decades; however, its stock market has exhibited a very different level of performance during financial crises. In this paper, we try to explain this phenomenon and answer two important questions: Is there financial contagion in China? Can economic integration aggravate financial contagion? We construct a composite index of economic integration by reviewing the incremental reform and opening-up process in China's financial markets. We utilize a dynamic conditional correlation model to capture the correlations between stock returns of China and those of other important markets around the world. The empirical results provide positive evidence for the aforementioned two questions. [ABSTRACT FROM AUTHOR]

This paper investigates order-based manipulation and its effects on investor behavior and market efficiency. Using a unique data set from the Chinese stock market, we show that (1) order-based manipulation affects market liquidity and trading behavior, (2) the manipulator pretends to be informed or expects to be seen as informed by choosing a "right" time to implement the manipulation, and (3) the manipulation rapidly changes investor reaction to the market order/depth imbalance in the short run, and the effect gradually drops during the postmanipulation period. Our results are robust to alternative measures and offer clear implications for both theory and policy. [ABSTRACT FROM AUTHOR]

This paper analyzes the effects of official rumor clarification on Chinese stock returns under different market conditions. The results show that the average cumulative abnormal return after the clarification event is significantly positive in a bull market, and significantly negative in a bear market. The results are robust across various types of rumors, including rumors of mergers and acquisitions, asset restructuring, and positive changes in a firm's operations. Moreover, in both bull and bear markets, investors are unable to distinguish between rumors that prove true and those that prove false, or between strong and weak rumor denial. Furthermore, investors are also unable to adjust their strategies accordingly. [ABSTRACT FROM AUTHOR]

This paper studies how the last three adjustments of the stamp duty on stock transactions (SDST) have affected trading behavior on the Chinese stock market. To exclude other shocks from our event study, we focus only on the SDST's short-term effects. Based on an interval autoregressive (IAR) model, we find that the SDST's effects on interval return are trivial; moreover, its ability to influence market volatility and trading volume is cast into doubt. Our empirical evidence lends support to the view that in China the SDST is not an effective policy tool. [ABSTRACT FROM AUTHOR]

This paper investigates fraudulent financial reporting (FFR) in the China-based companies listed on the Hong Kong Stock Exchange (called H shares) in which Chinese government officials have a high degree of involvement and heavy impact on audit quality and corporate governance. It intends to find out the causes of FFR, the opportunities that make such reporting possible, and whether the presence of politically connected executives creates an environment that is conducive to FFR. The results show that the corporate environment most likely to lead to FFR is characterized by earnings management accounting practices. [ABSTRACT FROM AUTHOR]

This paper extends the TVP-VAR (time-varying parameter structural vector autoregression) (Primiceri 2005) and TVP-R (time-varying parameter autoregression) (Nakajima 2011) to the long-memory models, and uses them to investigate the time-varying effects of changes in the interest rate and renminbi (RMB) exchange rate on the Chinese stock market from July 22, 2005, to January 13, 2012. As shown in the results, the short-term effect on stock returns of changes in the RMB exchange rate is sensitive to the reform of the increasing flexibility of the RMB exchange rate. The short-term effect of interest rate changes on stock returns may be sensitive to the 2008 financial crisis. In the long term, the impact of interest rate changes on stock returns is very limited, whereas appreciation of the RMB is not an unfavorable factor for the Chinese stock market. [ABSTRACT FROM AUTHOR]

This paper documents significant abnormal profits for industry momentum strategies in Chinese stock markets. Industry momentum remains profitable even after controlling for lead-lag effect, the January effect, and individual stock momentum. Moreover, momentum profits generated by industry-specific components are much larger than those generated by common-factor components of the Fama-French three-factor model and a delayed-reaction three-factor model. The findings provide new evidence that momentum profits are due to idiosyncratic risk and investors' underreaction to industry-specific information. The implication is that behavioral biases, market manipulation, and institutional trading are pivotal in explaining why stock prices do not incorporate industry-specific news instantaneously. [ABSTRACT FROM AUTHOR]

This paper analyzes the impact of changes in the securities transaction tax (STT) rate on the local A-share market in China. We find that, on average, a 22-basis-point increase in the STT rate is associated with about a 28 percent drop in trading volume, and a 17-basis-point reduction in the STT rate is associated with about an 89 percent increase in trading volume in the Chinese A-share market. Both increases and reductions in the STT rate result in significant increases in market volatility. In addition, increases in the STT rate have mixed effects on market efficiency, either improving or curbing it. Reductions usually either make the market less efficient or have no effect on it. The empirical results show that levying the STT on trading is not an effective tool to regulate the stock market, at least not in this emerging market. [ABSTRACT FROM AUTHOR]

This paper examines the cross-sectional relation between corporate governance and firm liquidity in the Chinese stock market. We construct a measure of overall quality of governance based on publicly available information for each firm listed on the Shanghai Stock Exchange (SHSE) and the Shenzhen Stock Exchange (SZSE) for each year over the 1999-2004 interval. After accounting for other liquidity-related factors, we present strong evidence that the level of corporate governance is positively related to firm liquidity. An increase of 1 percent in corporate governance index (total 100 percent) is on average associated with a 1.2 percent increase in a firm's annual turnover ratio over the subsequent year. Results from examinations of subindices of corporate governance provide further support for the positive governance-liquidity relation. These findings have important implications for academics to investigate the value of enhancing corporate governance, and for regulators to promote corporate governance reform. [ABSTRACT FROM AUTHOR]

This paper investigates the structural changes of volatility spillovers between Chinese A-share and B-share markets induced by a regulation change on February 19, 2001, that allowed Chinese domestic investors to trade in the B-share market. The empirical results of the study, using high-frequency intraday data collected from a sample of seventy-eight firms issuing both A-shares and B-shares and employing a bivariate generalized autoregressive conditional heteroskedasticity (GARCH) model, show that after the regulation change, the volatility in A-shares increases the volatility in B-shares, thus increasing the risk of the whole market, whereas the latter reduces the former, thus reducing the risk of the whole market. A further investigation of the determinants influencing these structural changes shows that the following factors can encourage structural changes that reduce overall market risk: government ownership, institutional ownership, firm size, B-share proportion, and market-to-book ratio. Conversely, the following factors can encourage structural changes that increase overall market risk: dual roles of chief executive officer and chairman and the joint effect of firm size and B-share proportion. [ABSTRACT FROM AUTHOR]

This paper empirically examines the relation between overreaction and the speed of information diffusion in the Chinese stock market. Industry-adjusted firm size and residual analyst coverage are used to proxy the speed of information diffusion. We document strong evidence that the profitability of a monthly contrarian strategy decreases with industry-adjusted firm size or residual analyst coverage. Moreover, the profitability of contrarian strategies survives for a longer horizon for stocks with slower information diffusion than for those with faster information diffusion. This result holds true even if risk, bid-ask spread, lead-lag effect, inventory costs, and limits to arbitrage are properly accounted for. Our findings suggest that information environment and information diffusion determine the extent of overreaction. [ABSTRACT FROM AUTHOR]

Using data from China's banks between 1995 and 2017, we employ propensity score matching and difference in differences approaches to investigate the effects of going public on bank risks, including insolvency risk, capital risk, liquidity risk, asset quality, credit risk, and prudential behavior, and obtain the following results. First, bank risks (except for insolvency risk) are improved after going public. Second, going public has stronger effects if a bank is listed on more than one stock exchange. Finally, both the single-listing effects and cross-listing effects of going public on bank risks are stronger in state-owned banks than in non-state-owned banks. [ABSTRACT FROM AUTHOR]

In recent years, the measurement and analysis of comovement have become important subjects with theoretical and practical value. The contagion effects specified in this paper include spillover effects under information transfer and coherent movement under common external influences. We propose using the structural conditional correlation model to measure these two contagion mechanisms. Empirical results find significant mean and volatility spillover and dynamic conditional correlation between the residual series of the structural conditional correlation model for China and U.S. stock index returns, which clearly reflect the transmission channel from international markets to China's markets, especially in financial crises. The methodology introduced here may have implications for the control and management of crises. [ABSTRACT FROM AUTHOR]

An introduction is presented in which the editor discusses various reports within the issue on topics including stock market, monetary policy in China, and external shocks in the world economy.

Previous research studies have suggested that rising optimism caused by booming stock prices has a significant negative impact on savings decisions. However, identifying this relationship clarifies only one side of the problem. It is also necessary to look at whether savings decisions can affect stock market performance. Moreover, another important question that policy makers may be interested in is how these savings and stock market investment decisions in the private sector can affect economic growth. This paper investigates this mechanism in China via a time-series approach and discusses further policy implications. [ABSTRACT FROM AUTHOR]

This paper analyzes intraday interdependence of returns and trades between Chinese equity and warrants markets based on a vector autoregression framework proposed by Chan et al. (2002). We find that both stock and warrant trades contain useful information for revealing quotes in the stock and warrants markets using 60- and 100-second data frequencies. However, when the data frequency is reduced from 100 seconds to 5 minutes, we find that stock volume has a negative impact on contemporaneous stock returns, which contradicts the informational effect of stock-trading activities. [ABSTRACT FROM AUTHOR]

Firms in concentrated industries (FCIs) might not be as valuable as they priced. Using a product-based monopoly measure for individual firms, we find that FCIs are prone to being overpriced in China stock market. This overpricing cannot be dismissed by varying proxies for arbitrage constraints and risks. Alternatively, it can be attributed to immoderate optimism on FCIs. In line with the optimism explanation, we find that FCIs suffer more serious fundamental declines in high economic policy uncertainty periods and that, the overpricing is corrected during earning announcements. These findings are robust across alternative model specifications and variable constructions. [ABSTRACT FROM AUTHOR]

This study investigates whether and how organization capital affects corporate financial constraints faced by Chinese small- and medium-sized enterprises (SMEs). Using SMEs listed on the Shenzhen Stock Exchange from 2001 to 2019, we find that organization capital significantly alleviates corporate financial constraints and that information asymmetry and operational efficiency are two possible mediators of the relationship. This effect is more pronounced for high-tech and growth-stage firms, consistent with the said mediation effect. Besides, we perform propensity score matching, instrumental variable regressions, and several robustness checks to address possible endogeneity concerns and measurement errors. [ABSTRACT FROM AUTHOR]

Using a sample of companies listed in the Chinese stock market between 2007 and 2019, this article investigates the effect of social trust on analysts' forecasts. Our results show that regional social trust can lower analysts' forecast errors and analysts' forecast dispersion, that is, it improves analysts' forecast quality. The institutional environment and state-owned property exacerbate these positive effects. Furthermore, the role of social trust in improving the quality of analysts' forecasts is more significant in listed companies with a poor information environment. We also find that social trust improves analysts' forecast quality by improving earnings quality. After some robustness tests, our main conclusions are still valid. Overall, the findings reveal social trust affects analyst's forecasts. [ABSTRACT FROM AUTHOR]

Using a unique and comprehensive data set of China’s Shenzhen Stock Exchange, we test whether all investors adopt attention-grabbing stocks. Only the less-wealthy individuals, the Small Group, are found to have the tendency to pursue attention-grabbing stocks, such as abnormal-volume stocks, extreme-return stocks, and initial public offering stocks. By contrast, wealthy individuals, such as the Middle and Large Groups, are the sellers of attention-grabbing stocks and prefer non-attention-grabbing stocks, thereby exhibiting a behavior resembling that of institutional investors. The wealth levels of individual investors may account for such heterogeneous trading behavior. Heterogeneous trading behavior may address one reason why only the less-wealthy individuals do poorly in China’s stock market. Accordingly, we suggest that the Small Group manage the stock selection problem through consultancy with investment institutions. [ABSTRACT FROM PUBLISHER]

We develop insights into how analysts' social ties affect their objectivity and the information content of reports, based on quantitative measures of social ties and textual information content. Using a sample ranges from January 2006 to December 2016 in China, we show that with wide social ties to fund managers, analysts' ability to burnish their reputation with informative reports and to achieve career success with optimistic stock ratings is enhanced. Further evidence indicates that the trade-off between reputation and career success is dynamic. Specifically, after being elected as New Fortune stars, analysts attach more importance on textual information and are less subjective on stock ratings. These findings are robust across various robustness tests. Overall, our evidence highlights the role of social ties in the information-dissemination process in China A-share stock markets from the perspective of analysts and fund managers. [ABSTRACT FROM AUTHOR]

We propose three hypotheses regarding the effects of individual investors' attention on stock returns according to special features of China's stock market. We adopt the Baidu index as the proxy for individual investors' attention to stocks. Empirical tests of the three hypotheses are based on sample data collected from the ChiNext market. Results show that individual investors' attention and market return have joint positive effects on short-term stock returns. Furthermore, high individual investors' attention to IPO stocks leads to high first-day returns but low long-term returns following the first trading day. [ABSTRACT FROM AUTHOR]

We investigate the relationship between international oil shocks and the sectoral dynamics of the Chinese stock market. Our empirical results show that the behavior and response to international oil shocks by the Chinese stock market differ significantly from the behavior and responses of the European stock market as documented in the literature. In China, only the mining industry has a strong and consistent link with international oil shocks when systematic risk factors are controlled. There is no clear evidence of asymmetries in China's sectoral stock-oil relationship. [ABSTRACT FROM AUTHOR]

This is the first study to examine the 52-week high momentum strategy that takes economic policy uncertainty (EPU) into account. Empirically, we find significant 52-week high momentum in China, the second-largest stock market in the world, and our findings confirm the results of the US. We hypothesize that anchoring biases could explain the 52-week high momentum and generate significant momentum profits in low EPU periods. The empirical results show strong 52-week high momentum in low EPU periods; there is virtually no momentum when EPU is high, which supports our prediction. Further investigations show that there are no long-run reversals for the 52-week high momentum, and the negative impact of EPU on the 52-week high momentum decreases and eventually vanishes over the long term. All evidence supports the hypothesis that the 52-week high momentum is attributed to anchoring biases, especially when we consider EPU. [ABSTRACT FROM AUTHOR]

This study examines the determinants and consequences of firms' disclosures related to the COVID-19 pandemic in annual financial reports in China. First, we find that firms with high growth opportunity or low stock liquidity tended to disclose COVID-19 pandemic information to mitigate information asymmetry. Second, our results show that voluntary risk disclosure significantly decreased stock risks due to the reduction of information asymmetry. We further find that stock price crash risks decreased for firms that reported risk information compared with those that did not. Our results suggest that detailed voluntary risk disclosure is needed to mitigate stock risks, especially in extreme situations. [ABSTRACT FROM AUTHOR]

Motivated by the recent debate on the implications of low R2 in the U.S. market, we conjecture that lower R2 is more likely to be associated with noise and low pricing efficiency because stock price tracks its fundamentals more loosely in a less efficient stock market such as China. We conclude that, first, there is no significant difference in information content among stocks with high and low R2. Second, both accruals anomaly and price momentum are much stronger among firms with lower R2. Moreover, the price momentum effect is much stronger among stocks with higher DIS, a new proxy constructed to provide a direct description of noise in stock price. [ABSTRACT FROM AUTHOR]

An introduction to the journal is presented in which the editor discusses the stability of the stock market in China.

This study uses stock market data to examine whether China's Environmental Protection Tax Law (EPT Law) effectively influences firms' environmental behavior. Using the event study methodology, we find that the Law generally affects listed firms. Though higher environmental tax rates are negatively associated with the Law's effectiveness from the investors' perspective, greater investment in research and development can reduce firms' emissions and achieve greater compliance with a stringent environmental regime. Sub-sample tests show that the EPT Law has a greater impact on polluting firms than on nonpolluting firms, indicating that this policy effectively targeted polluters. [ABSTRACT FROM AUTHOR]

We study the heterogeneous valuation of Chinese A-share stocks caused by high or low market sentiment and its impact on corporate investment during 2005Q3–2015Q2. We divide stocks into three types based on sentiment betas. We find that for "speculative" (and "bond-like") stocks, overvaluation from high (low) sentiment increases corporate investment, but undervaluation from low (high) sentiment can be arbitraged away; "investment-Q" sensitivity is relatively weak. For "rationally valued" stocks, corporate investment is positively correlated with valuation and has no consistent relationship with market sentiment. However, changes in market sentiment can reduce the reliance of managers' investment decisions on valuation. [ABSTRACT FROM AUTHOR]