Understanding the Market Segmentation and Price Discovery of Cross-Listed Chinese Stocks in New York and Hong Kong

Abstract

This study extends the literature on the price discovery process of cross-listed Chinese stocks by examining a novel dataset of 47 Chinese firms that were dual listed on stock exchanges in New York and Hong Kong at any point prior to the end of 2024. Unlike most previous research, this study focuses not solely on state-owned enterprises (SOEs) but rather incorporates data from over thirty private Chinese firms that listed on the Hong Kong Stock Exchange (HKEX) amid heightened U.S.-delisting risk around 2020. We take advantage of asynchronous trading hours between NY and HK to estimate lead-lag regressions of daily returns using ordinary least squares, fixed effects, and seemingly unrelated regression models. We find evidence that the NY and HK markets remain segmented and that the market where a firm trades more intensively tends to be more price informative, even if this market is not the firm’s home market.