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Financial Innovation

Table 3 Stock connect and market efficiency: the role of stock price informational efficiency

From: The effect of overseas investors on local market efficiency: evidence from the Shanghai/Shenzhen–Hong Kong Stock Connect

 

(1)

(2)

DailySprd1

DailySprd2

HSSC

0.0020***

0.0017***

 

(9.75)

(9.50)

SYN

0.0017***

0.0015***

 

(26.78)

(25.70)

HSSC × SYN

0.0003***

0.0003***

 

(2.62)

(2.99)

Size

0.0020***

0.0018***

 

(19.79)

(19.47)

Lev

 − 0.0050***

 − 0.0044***

 

(− 11.84)

(− 11.67)

ROA

0.0059***

0.0050***

 

(3.86)

(3.62)

Cash_vol

 − 0.0001**

 − 0.0001*

 

(− 1.97)

(− 1.80)

Loss

0.0006***

0.0005***

 

(2.67)

(2.67)

Age

0.0001

0.0001

 

(1.35)

(0.87)

Opinion

 − 0.0008**

 − 0.0007**

 

(− 2.12)

(− 2.15)

Analyst

 − 0.0010***

 − 0.0011***

 

(− 14.54)

(− 16.27)

Turnover

 − 0.0008***

 − 0.0007***

 

(− 49.82)

(− 50.14)

_cons

 − 0.0829***

 − 0.0746***

 

(− 47.69)

(− 47.39)

Industry

Yes

Yes

Year

Yes

Yes

N

17,086

17,086

adj. R2

0.775

0.776

  1. Following Bae et al. (2006) and Morch et al. (2000), we adopt the interaction terms HSSC*SYN to investigate how cross-sectional variations in stock price informational efficiency change our baseline results. Stock price synchronicity is inversely related to stock price informational efficiency. We use stock price synchronicity as an alternative measure of stock price informativenss, defined as the R2 from regressions based on a single factor market model for stock returns. Higher values of R2 (i.e., greater stock price synchronicity) reflect more market-wide information and less firm-specific information. Robust standard errors in parentheses are clustered by firm level
  2. ***, **, and * denote significance at the 1%, 5%, and 10% level, respectively
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