Heterogeneous beliefs, investor sentiment and A-H share premium

摘要

Based on monthly data of dual-listed companies in A share and H share markets from November 2006 to November 2009, this paper provides an explanation for A-H share premium by introducing two behavioral factors: heterogeneous beliefs and investor sentiment. The results show that, under the short-sales constraints of A share market, the stronger the heterogeneous beliefs, the higher the A-H premium rate. The higher the investor sentiment of A share market, the higher the A-H premium rate. Under higher investor sentiment, A shares of stocks whose intrinsic value is difficult to estimate are more likely to be overpriced, leading to a higher A-H premium rate. Moreover, higher investor sentiment can strengthen the effect of heterogeneous beliefs on AH premium rate. Overall, theories on heterogeneous beliefs and investor sentiment can well explain the irrational phenomenon of A-H share premium.