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We examine the roles of risk-sharing and other factors in stock price revaluation during a recent liberalization episode in China. Consistent with the theoretical prediction that liberalizations reduce systematic risk,… Click to show full abstract
We examine the roles of risk-sharing and other factors in stock price revaluation during a recent liberalization episode in China. Consistent with the theoretical prediction that liberalizations reduce systematic risk, we find that risk-sharing explains approximately one-fourth of the price revaluation of investible stocks during the eight-month window between reform announcement and implementation. The firm-specific information generated by the reform is more efficiently priced into stocks that have a higher degree of market liquidity, information transparency, and informed trading.
Journal Title: Journal of Banking and Finance
Year Published: 2017
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