Domestic versus foreign equity shares : Which are more costly to trade in the Chinese market?

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)465-481
Journal / PublicationInternational Review of Economics and Finance
Publication statusPublished - Jun 2013


This paper investigates the transaction costs of the domestic and foreign shares in the Chinese market after the 2001 reform. We find that the higher transaction costs of foreign shares (vs. domestic shares) on the Shanghai Stock Exchange are attributable to their less active trading activities, higher volatility of trade-by-trade price returns, higher probability of information-based trading, and bigger relative tick for quoted prices. In contrast, the lower transaction costs of foreign shares (vs. domestic shares) on the Shenzhen Stock Exchange are mainly due to their lower degree of discreteness for quoted prices. © 2013 Elsevier Inc.

Research Area(s)

  • Bid-ask spread, Chinese stock markets, Price discreteness, Transaction cost