How does the exchange-rate regime affect dual-listed share price parity? Evidence from China’s A- and H-share markets

This paper examines the impact of exchange-rate regime change on price disparity China’s dual-listed stocks. We use four years synchronous intraday data 26 pairs RMB-denominated A-shares and their corresponding HKD-denominated H-shares. The sample period covers 2005 2008 changes in exchange rate regime. During that time, Chinese authorities strictly prohibited short selling stocks tightly regulated capital flows. In contrast to existing general findings, we find law one can be strengthened for (DLSs) segmented markets under a flexible regime; between DLSs is reduced managed float compared pegged Moreover, magnitude H-share discount positively related expected RMB appreciation float; however, relationship negative.