The Revealed Inefficiencies of the China A-H Premium
研究中国A-H股溢价现象，发现溢价由A股市场散户参与驱动，基于溢价偏离均衡构建的两个因子能获得显著超额收益，且A股定价效率低于H股。
The ratio of the price of a dual-listed A-share to the price of its corresponding H-share (the A-H premium) is persistent both in aggregate and cross-sectionally. The A-H premium for a given stock converges to a universal equilibrium A-H premium but more strongly to a stock-specific equilibrium A-H premium. The latter indicates different long-run investor preferences for different stocks in the onshore A-share market versus the offshore H-share market. The authors provide evidence that this differential is driven by the high retail investor participation in the China A-share market. They propose two new factors based on the divergence of a stock’s A-H premium from its universal and stock-specific equilibrium A-H premium. These two factors earn significant Fama–French three-factor alpha and earn alpha against each other. Lastly, the authors show that a dual-listed A-share is less efficiently priced than its H-share counterpart. <b>TOPICS:</b>Security analysis and valuation, emerging markets, analysis of individual factors/risk premia <b>Key Findings</b> ▪ Chinese stocks that are dual-listed as A-shares and H-shares tend to have large, persistent A-share premiums relative to their H-share counterparts. ▪ A strategy of increasing weight in firms with low A-H premiums and decreasing weight in firms with high A-H premiums tends to earn excess returns over a capitalization-weighted benchmark. ▪ The A-H premium is driven primarily by inefficiencies in A-share pricing, caused by specific retail preferences from the largely retail A-share market.