Measuring the market impact of the Shanghai-Hong Kong Stock Connect Program : an event study analysis

Abstract

Financial liberalization in the PRC has been a gradual process. The most recent liberalization effort was the Shanghai-Hong Kong Stock Connect program which represents the first program allowing direct access between the Shanghai Stock Exchange and the Stock Exchange of Hong Kong. This study analyzes the stock price impact arising from this program for various subsets of both markets using a regression model event study analysis. The data suggest a positive abnormal return for eligible A shares on the SSE with 1% level of significance, whereas the data suggest a negative impact on the eligible shares of the SEHK, with 5% level of significance. The program's impact on the B share market of the SSE was statistically insignificant.