University of Macau / Faculty of Science and Technology / Department of Mathematics

This thesis focuses on the stocks in two major stock exchanges in China: the Shanghai Stock Exchange and the Shenzhen Stock Exchange. In order to understand the overall performance of the Chinese stock markets, the research compares the performance among Chinese stock markets, other emerging stock markets, and the S&P 500 Index during the 1990's.

This thesis studies the trading of the Chinese American Depositories Receipts (ADRs) and their respective underlying H shares issued in Hong Kong. The primary intention of this work is to investigate the arbitrage opportunity between the Chinese ADRs and their underlying H shares. This intention is motivated by the market observation that hedge funds are often in the top 10 shareholders of these Chinese ADRs. We start our study from the origin place of the Chinese ADRs, China’s stock market. We pay particular attention to the ownership structure of the Chinese listed firms, because part of the Chinese ADRs also listed A shares (exclusively owned by the Chinese citizens) in Shanghai. We also pay attention to the market microstructures and trading costs of the three China-related stock exchanges. We then proceed to empirical study on the Chinese ADRs arbitrage possibility by comparing the return distribution of two securities; we find these two securities are different in their return distributions, and which is due to the inequality in the higher moments, such as skewness, and kurtosis. Based on the law of one price and the weak-form efficient markets, the prices of identical securities that are traded in different markets should be similar, as any deviation in their prices will be arbitraged away. Given the intrinsic property of the ADRs that a convenient transferable mechanism exists between the ADRs and their underlying shares which makes arbitrage easy; the different return distributions of the ADRs and the underlying shares address the question that if arbitrage is costly that the equilibrium price of the security achieved in each market is affected mainly by its local market where the Chinese ADRs/the underlying Hong Kong shares are traded, such as the demand for and the supply of the stock in each market, the different market microstructures and market mechanisms which produce different trading costs in each market, and different noise trading arose from asymmetric information across multi-markets. And because of these trading costs, noise trading risk, and liquidity risk, the arbitrage opportunity between the two markets would not be exploited promptly. This concern then leads to the second intention of this work that how noise trading and trading cost comes into playing the role of determining asset prices, which makes us to empirically investigate the comovement effect, as well as liquidity risk. With regards to these issues, we progress into two strands, firstly, we test the relationship between the price differentials of the Chinese ADRs and the market return of the US and Hong Kong market. This test is to examine the comovement effect which is caused by asynchronous noise trading. We find the US market impact dominant over Hong Kong market impact, though both markets display significant impact on the ADRs’ price differentials. Secondly, we analyze the liquidity effect on the Chinese ADRs and their underlying Hong Kong shares by using two proxies to measure illiquidity cost and liquidity risk. We find significant positive relation between return and trading volume which is used to capture liquidity risk. This finding leads to a deeper study on the relationship between trading volume and return volatility from market microstructure perspective. In order to verify a proper model to describe return volatility, we carry out test to examine the heteroscedasticity condition, and proceed to use two asymmetric GARCH models to capture leverage effect. We find the Chinese ADRs and their underlying Hong Kong shares have different patterns in the leverage effect as modeled by these two asymmetric GARCH models, and this finding from another angle explains why these two securities are unequal in the higher moments of their return distribution. We then test two opposite hypotheses about volume-volatility relation. The Mixture of Distributions Hypothesis suggests a positive relation between contemporaneous volume and volatility, while the Sequential Information Arrival Hypothesis indicates a causality relationship between lead-lag volume and volatility. We find supportive evidence for the Sequential Information Arrival Hypothesis but not for the Mixture of Distributions Hypothesis.

by Leung Chui-wa. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1995. / Includes bibliographical references (leaves 72-75). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iii / LIST OF TABLES --- p.v / ACKNOWLEDGEMENT --- p.vii / Chapters / Chapter I. --- introduction --- p.1 / Purpose of the project --- p.2 / Scope of the project --- p.2 / Methodology and literature review --- p.2 / Chapter II. --- BACKGROUND OF OFFSHORE LISTING OF CHINA ENTERPRISES --- p.5 / Reform of China state-owned enterprise --- p.5 / Development of China securities market --- p.8 / Capital needs of China --- p.11 / China's participation in global economy --- p.12 / China's resumption of Hong Kong's sovereignty --- p.13 / Chapter III --- OVERVIEW OF OFFSHORE LISTING OF CHINA ENTERPRISES.…… --- p.15 / China policies over offshore listings of China enterprises --- p.15 / Overall policy --- p.16 / Selection of State-owned enterprises for offshore listings --- p.17 / Selection of listing venue --- p.19 / Competition among stock exchanges worldwide --- p.20 / Australia --- p.21 / Canada --- p.22 / London --- p.22 / Singapore --- p.23 / Tokyo --- p.24 / Chapter IV. --- listings of china enterprises in hong kong and the united states --- p.26 / Current situation in Hong Kong and New York --- p.26 / China enterprises listed in Hong Kong and New York --- p.28 / Hong Kong --- p.28 / New York --- p.30 / Important issues for consideration --- p.32 / Regulatory regime --- p.32 / Offering mechanism --- p.35 / Market characteristics --- p.38 / Advantages and disadvantages of listing in Hong Kong and the US --- p.39 / Chapter V. --- trading performance of h shares and h/n share adrs … --- p.41 / Scope and methodology of the analysis --- p.41 / Findings --- p.42 / Discussion --- p.45 / Chapter VI. --- discussion and conclusion --- p.47 / Implications on SOEs and China economy --- p.47 / Implications on the Hong Kong stock market --- p.50 / appendix --- p.54 / bibliography --- p.72

by Tong See Wai. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2000. / Includes bibliographical references (leaves 78-80). / Abstracts in English and Chinese. / Abstract --- p.i / Acknowledgements --- p.iii / Table of Contents --- p.iv / List of Tables --- p.vii / List of Figures --- p.viii / Chapter 1. --- Introduction --- p.1 / Chapter 2. --- Background and Data --- p.5 / Chapter 2.1 --- Linkage between Hong Kong's real estate market and stock market --- p.5 / Chapter 2.2 --- Review of Hong Kong mortgage lending policy --- p.6 / Chapter 2.3 --- Corporate Profiles --- p.7 / Chapter 2.3.1 --- Cheung Kong (Holdings) Limited --- p.7 / Chapter 2.3.2 --- Hang Lung Development Company Limited --- p.7 / Chapter 2.3.3 --- Henderson Land Development Company Limited --- p.8 / Chapter 2.3.4 --- New World Development Company Limited --- p.8 / Chapter 2.3.5 --- Sino Land Company Limited --- p.8 / Chapter 2.3.6 --- Sun Hung Kai Properties Limited --- p.9 / Chapter 2.3.7 --- Swire Pacific Limited --- p.9 / Chapter 2.4 --- Sources of Data --- p.10 / Chapter 3. --- Literature Review --- p.12 / Chapter 4. --- Methodology --- p.17 / Chapter 4.1 --- Nominal Rate of Capital Gain --- p.17 / Chapter 4.2 --- Internal Rate of Return --- p.19 / Chapter 5. --- Results --- p.25 / Chapter 5.1 --- Empirical Findings --- p.25 / Chapter 5.1.1 --- Results from Aggregate Data --- p.25 / Correlations of Returns --- p.26 / Average Rate of Capital Gain --- p.26 / Chapter 5.1.2 --- Results from Disaggregated Data --- p.27 / Graphs --- p.27 / Correlations of Returns --- p.28 / Property Developers --- p.28 / Housing Estates --- p.28 / Testing the Significance of Correlation --- p.29 / Cross Correlation Matrix on Stock --- p.30 / Regression --- p.30 / Average Returns on Housing and Stock --- p.31 / Unleverage --- p.31 / Leverage --- p.31 / Comparison of the Average Unleveraged Return with the Average Leveraged Return --- p.31 / Housing --- p.31 / Stock --- p.32 / Comparison of the Average Return calculated from Aggregate Data with that calculated from Disaggregated Data --- p.32 / Housing --- p.32 / Stock --- p.33 / Chapter 5.2 --- Discussion --- p.33 / Chapter 5.2.1 --- Correlation of Returns --- p.33 / Chapter 5.2.2 --- Average Return --- p.35 / Chapter 5.2.3 --- Hedging --- p.39 / Chapter 6. --- Conclusion --- p.40 / Tables --- p.41 / Figures --- p.58 / References --- p.78

Kam Ying Chuen. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2000. / Includes bibliographical references (leaves 81-83). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Overview of Hong Kong Stock Market --- p.3 / Chapter 2.1 --- Stock Exchange of Hong Kong --- p.3 / Chapter 2.2 --- Hang Seng Index --- p.4 / Chapter 2.3 --- Influences of the United States --- p.5 / Chapter 2.4 --- Hong Kong Government's Intervention --- p.6 / Chapter 3 --- Literature Review --- p.8 / Chapter 3.1 --- Stable and Student t Distributions --- p.8 / Chapter 3.2 --- Generalized Distribution --- p.10 / Chapter 3.3 --- Socio-economic Model --- p.11 / Chapter 3.4 --- Extreme Value Analysis --- p.11 / Chapter 4 --- Methodology --- p.14 / Chapter 4.1 --- Homogeneous Model --- p.15 / Chapter 4.2 --- Inhomogeneous Model --- p.15 / Chapter 4.3 --- Model Validity --- p.16 / Chapter 4.3.1 --- Exceedance Rate --- p.17 / Chapter 4.3.2 --- Distribution of Excesses --- p.17 / Chapter 4.3.3 --- Independence --- p.18 / Chapter 5 --- Data --- p.19 / Chapter 5.1 --- Minute-by-minute Returns --- p.20 / Chapter 5.2 --- Daily returns --- p.21 / Chapter 5.3 --- Explanatory Variables for the Inhomogeneous Model --- p.21 / Chapter 6 --- Empirical Results: Minute-by-minute Returns --- p.24 / Chapter 6.1 --- Shape Parameter k --- p.24 / Chapter 6.2 --- Location Parameter μ --- p.25 / Chapter 6.3 --- Scale Parameter σ --- p.26 / Chapter 6.4 --- Conditional Scale Parameter ψ --- p.27 / Chapter 6.5 --- Specification Test --- p.29 / Chapter 7 --- Empirical Results: Daily Returns --- p.29 / Chapter 7.1 --- Homogeneous Model --- p.30 / Chapter 7.2 --- Inhomogeneous Model --- p.31 / Chapter 7.2.1 --- Constant Term --- p.32 / Chapter 7.2.2 --- Dow Jones Industrial Average Returns --- p.33 / Chapter 7.2.3 --- Volatility Indicators --- p.34 / Chapter 7.2.4 --- Monday Dummy --- p.35 / Chapter 7.2.5 --- Time Trend --- p.36 / Chapter 7.2.6 --- Duration Dummy --- p.37 / Chapter 7.2.7 --- Indicator for the Behavior of the Previous Trading Day --- p.38 / Chapter 8 --- Conclusion --- p.39

by Xueyi Chen. / Thesis submitted in: December 1997. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1998. / Includes bibliographical references (leaves 96-106). / Abstract also in Chinese. / Table of Contents / Abbreviations / Timeline / Chapter Chapter 1 --- Introduction / Chapter 1.1 --- Purpose and Significance / Chapter 1.2 --- Thesis Structure / Chapter Chapter 2 --- Historical Background / Chapter 2.1 --- Development of China's Stock Markets / Chapter 2.2 --- Paradox in China's Stock Markets / Chapter 2.3 --- Stock News Reporting in China / Chapter Chapter 3 --- Literature Review / Chapter 3.1 --- The Perspective of Political Economy: An Overview / Chapter 3.2 --- The Political Economy of China's Party Press: Change and Continuity / Chapter 3.2.1 --- "In the Mao Era: The Chinese Press as Propagandist, Agitator and Organizer" / Chapter 3.2.2 --- In the Era of Economic Reform: A Paradigm Shift / Chapter Chapter 4 --- Assumptions / Chapter Chapter 5 --- Methodology / Chapter 5.1 --- Four Periods: Operational Definitions for the Interplay of State Controls and Market Forces / Chapter 5.2 --- Contexts of the Field Study / Chapter 5.3 --- Research Procedures / Chapter 5.2.1 --- Content Analysis / Chapter 5.2.2 --- In-depth Interview / Chapter 5.2.3 --- Documentary Analysis / Chapter 5.2.4 --- Participant Observation / Chapter Chapter 6 --- Stock News Reporting under State-Market Dynamics / Chapter 6.1 --- The Period of Initial Reforms: From the Early 1980s to the Mid-1980s / Chapter 6.1.1 --- Continuing State Controls / Chapter 6.1.2 --- Absence of Market and Competition / Chapter 6.1.3 --- Content Pattern: Ideological Orthodoxy / Chapter 6.1.4 --- Reporting Mode: Orthodox Reporting / Chapter 6.2 --- The Period of Continuing Reforms: From the Mid-1980s to the Late1980s / Chapter 6.2.1 --- Relaxed State Controls / Chapter 6.2.2 --- Emerging Competition / Chapter 6.2.3 --- Content Changes: Minor Departures from Ideological Orthodoxy / Chapter 6.2.4 --- Reporting Mode: Orthodox Reporting with Increased Flexibility / Chapter 6.3 --- The Period of Interrupted Development: From the Late 1980s to1992 / Chapter 6.3.1 --- The Resumption of Tight State Controls / Chapter 6.3.2 --- Strengthening Market / Chapter 6.3.3 --- "Content Changes: Greater Diversity, News Value, and Responsiveness to Readers" / Chapter 6.3.4 --- Reporting Mode: Managing the News / Chapter 6.4 --- The Period of Ideological Legitimization: From 1993 to1996 / Chapter 6.4.1 --- Shorter Control-Relaxation Cycle / Chapter 6.4.2 --- Increasing Market Pressure / Chapter 6.4.3 --- Content Changes: Increased Standardization / Chapter 6.4.4 --- Reporting Mode: Standardizing the News / Chapter Chapter 7 --- Conclusion / Chapter 7.1 --- Summary / Chapter 7.2 --- Impact of Interplay of Politics and Economics on Journalism as an Issue-Variant Relationship / Chapter 7.3 --- Future Research / Tables / References

Tang Lok Ming. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2005. / Includes bibliographical references (leaves 86-87). / Abstracts in English and Chinese. / Chapter 1. --- Introduction --- p.1 / Chapter 2. --- Severe Acute Respiratory Syndrome (SARS) --- p.8 / Chapter 2.1 --- Nature of SARS --- p.8 / Chapter 2.2 --- Impacts of SARS --- p.9 / Chapter 2.3 --- Literature of SARS --- p.13 / Chapter 2.4 --- Evolution of SARS in Mainland China --- p.16 / Chapter 3. --- Event Study Methodology --- p.18 / Chapter 4. --- Data --- p.24 / Chapter 5. --- Results --- p.25 / Chapter 5.1 --- Hong Kong --- p.26 / Chapter 5.2 --- Mainland China --- p.31 / Chapter 6. --- Conclusion --- p.47 / Figures --- p.50 / Tables --- p.59 / Appendix --- p.64 / References --- p.86

published_or_final_version / Statistics / Master / Master of Philosophy

by Wong Hiu Ming. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1999. / Includes bibliographical references (leaves 74-79). / Abstracts in English and Chinese. / ACKNOWLEDGMENTS --- p.iii / LIST OF TABLES --- p.iv / LIST OF ILLUSTRATIONS --- p.v / CHAPTER / Chapter ONE --- INTRODUCTION --- p.1 / Chapter TWO --- THE LITERATURE REVIEW --- p.5 / ARCH/GARCH Models / Nonparametric Method / Chapter THREE --- METHODOLOGY --- p.14 / ARCH Modeling / Semiparametric GARCH Modeling / Causality Test / Local Polynomial Model / Chapter FOUR --- DATA AND EMPIRICAL RESULTS --- p.37 / Data / GARCH Modeling / Semiparametric GARCH Modeling / Causality Test / Local Polynomial Model / Chapter FIVE --- CONCLUSION --- p.52 / TABLES --- p.56 / ILLUSTRATIONS --- p.62 / APPENDIX --- p.71 / BIBLIOGRAPHY --- p.74