Faculty Scholarship 1994 - Present
Bid-Ask Spreads, Holding Periods, and Share Prices in the Market for Chinese A and B Shares
The Chinese stock markets for A (domestic) and B (foreign) shares are completely separated. Our study extends Atkins and Dyl  by examing the relationship between holding periods and spreads in the two separated markets. The sample here is a set of 52 firms that simultaneously list A and B shares in 1995. We find that the median holding period of the A shares (1.8 quarter) is substantially shorter than that of the B shares (10 quarters). The median spread of A shares is (0.39%) is also substantially lower than that of B shares (4.77%). Our major findings are as follows. (1) The positive relationship between holding periods and spreads in the U.S. market  also exists in the Chinese stock market. (2) The relationship between holding periods and bid-ask spreads is qualitatively the same for A and B shares. (3) The regression analysis indicates that the bid-ask spread is the most important factor in explaining the relative holding period of the A and B shares. However, the B share price discount cannot be explained by the liquidity factor.