Economics Honors Thesis

Below is a list of stocks that are traded on three exchanges: the New York Stock Exchange (NYSE), the Hong Kong Stock Exchange (HKEX), and the Shanghai Stock Exchange (SSE). As you will notice, there is a premium ranging from 12% to 388% for stocks listed in Shanghai compared to those listed in the US for the same company. In a market where there are no restrictions on supply and demand and no easy arbitrage opportunities, there probably would still be a difference in the pricing of a stock that is listed on two different exchanges. It is an issue I'd be interested in looking into. According to this article, from the 45 Chinese companies dual-listed in both Hong Kong and the mainland, the H-shares are 34% cheaper.  Recently, there was a rumor from the China Securities Regulatory Commission (CSRC) that suggested the PRC was considering allowing swaps between the A-shares listed on the mainland and the H-shares listed in Hong Kong. Although these rumors were later dismissed, it certainly raises questions such as how efficient the SSE and HKEX currently are and also what the equilibrium prices would be if these swaps were allowed.

Triple-Listed Stocks
Company	Stock Symbols / Prices (On Oct 5th)						Shares/ADS	Premiums
	NYSE		Hong Kong		Shanghai			Hong Kong to US	Shanghai to US	Shanghai to Hong Kong
Yanzhou Coal Mining	YZC	$101.70	1171.hk	HK$15.32	600188	￥22.92	50	16.75%	69.21%	54.44%
China Petroleum & Chemical Corp.	SNP	$126.81	0386.hk	HK$9.77	600028	￥18.94	100	-40.29%	12.14%	100.12%
Huaneng Power International	HNP	$52.48	0902.hk	HK$9.90	600011	￥17.42	40	46.21%	149.22%	81.64%
Guangshen Railway	GSH	$42.30	0525.hk	HK$6.40	601333	￥9.93	50	17.26%	76.25%	60.17%
China Life Insurance	LFC	$95.97	2628.hk	HK$48.35	601628	￥62.41	15	290.47%	388.25%	33.25%
Aluminum Corp. of China	ACH	$76.85	2600.hk	HK$23.10	601600	￥47.75	25	132.97%	366.50%	113.38%
Exchange Rates (On Oct 19th)
HK$ / $	0.129026
Yuan / $	0.133191
HK$ / Yuan	1.03229

I found the following few papers to be of interest:

• International Stock Market Efficiency and Integration: A Study of Eighteen Nations by Chan, Gup, and Pan
• Testing Efficiency of the Latvian Stock Market: An Evolutionary Perspective by Timur Mihailov
• An Empirical Test of German Stock Market Efficiency by Lindsay Gillette
• Testing Informational Market Efficiency on Kuala Lumpur Stock Exchange by Ozer Balkiz
• Testing for Market Efficiency in Emerging Markets: Evidence from the Athens Stock Exchange by George Filis
• Testing Stock Market Efficiency Using Neural Networks: Case of Lithuania by Marius Januskevicius

Also, I read this interesting article regarding the "Shanghai Premium", a disturbing fact that stocks listed on both the Chinese stock market and either the Hong Kong or US stock market (or all three) exhibit a heavy premium (in the neighborhood of 50-100%) for the Chinese stocks, even though the fundamental value of these stocks are the same. It's really more of a supply/demand issue since Chinese investors aren't yet allowed to participate in foreign stock exchanges or sell short Chinese stocks.

Click below to read the second draft of my thesis proposal.  There's not many significant changes; I just expanded some of the sections to reflect the recent work (see Lit Review) that I have done.

Word	Pdf

Today, Woglom gave me some feedback on how to improve upon my Lit Review.  One of the key points I plan to add to my paper is Malkiel's finding that mutual funds didn't beat market returns (i.e. index funds), and taking into account load fees and commissions, they actually tended to perform worse.  This week I will doing more background research to make sure my thesis hasn't already been done by someone else.  Also, later this week another draft of the Thesis Proposal will be due.

The first draft for my thesis Literature Review is done. It's 6 pages long double-spaced and cites 34 references =).

Word	Pdf

I will take a look at some historical stock market data of the Hang Seng Index and the iShares Hong Kong ETF which I pulled off of Yahoo Finance and Google Finance, respectively.  Hopefully I will remember enough econometrics from a few years ago to study their returns. 

Note: To view these files, right click on the links and save them to your computer.  You can open .csv files with Excel.

Note 2: My previous suggestion on saving and viewing this file actually doesn't seem to work. I will get it fixed as soon as I can.

Note 3: After you right click and choose to save, if you change the file extension from .htm to .csv, that should do it.

HSI (since 12/31/1986)

EWH (since 4/12/1996)