This paper investigates whether seasonalities in daily stock returns are related to the trading behavior of individual and institutional investors. The change in the investor structure of B-share markets in Shanghai and Shenzhen after the abolition of ownership restrictions in 2001 provides a unique testing environment. We show that day-of-the-week effects are attenuated after the market entrance of Chinese individual investors, who had previously not been allowed to trade in B-shares. Our empirical results suggest that institutional rather than individual investors are a main driving force behind such anomalies. In addition, we find evidence of reduced index return autocorrelation and US spillover effects in the post-liberalization period.

The B-share markets in China, originally for foreign investors only, were opened to local investors in 2001. This reform was expected to improve the information efficiency in B-share markets, since local investors were supposed to be better informed than foreign investors. Meanwhile, we find that, after opening to local investors, B-share price synchronicity increases, and firm-specific return variation (idiosyncratic risk) decreases. Opening B-share markets to local investors fails to improve or even deteriorates the information capitalization of B-share prices. The findings may help us understand Chinese government’s policy making. For instance, in August 2007, Chinese government announced that Chinese citizens would be allowed in public to buy and sell Hong Kong stocks through special accounts with domestic commercial banks. But after hearing opinions from different entities, Chinese government decides to infinitely postpone this policy.

In this paper, the relationship between firm performance’s combinations and differences as well as the timeliness of actual and scheduled third-quarter report disclosures is examined by regressing on data extracted from the semi-annual and the third-quarter reports of Chinese listed companies between 2003 and 2004. After controlling for the possible impact of semi-annual report disclosures, stock exchanges, firm size, ratios of tradable A-shares and B-shares, and so on, the results indicate that managers of listed companies may have the incentive to manipulate information in the actual and scheduled third-quarter report disclosures; the rule of “releasing good news earlier than bad news” is thus not strictly complied with. This paper further indicates that a firm’s performance, its combinations and differences, have a significant impact on the timeliness of disclosures of these two reports. I therefore suggest minimising the probability of information manipulation of listed companies, boosting investor relation management to safeguard the rights of small and medium shareholders, and enhancing the timeliness of information disclosures of Chinese listed companies.

Until recently, trading in Chinese markets was fully segmented―B-shares for foreign investors and A-shares for domestic investors. The fact that B-shares trade at a discount is a puzzle, since comparable markets overwhelmingly show premiums that are easily explained by international asset pricing models. The two most common explanations for this puzzle are that domestic investors are (i) better-informed and (ii) face lower costs of liquidity. The evidence, however, is inconclusive and relies on poor proxies. Based on as of yet unused trade and quote data, we explore direct measures of both information and liquidity using a spread decomposition model. We reject the liquidity-based explanation and find considerable support for betterinformed domestic investors. This creates an empirical basis for recent equilibrium models that rely on asymmetric information to explain China’s strong growth in spite of poor property rights.