Foreign Investment and Stock Price Informativeness: Evidence From the Shanghai (Shenzhen)–Hong Kong Stock Connect

This article investigates the impact of heterogeneous foreign investment on home market stock price informativeness. Evidence from China’s nascent A-share shows non-segmented reduces firms’ return synchronicity, while segmented does not. Using Shanghai (Shenzhen)–Hong Kong Stock Connect program as a natural experiment that exogenously increases ownership, we find synchronicity drops significantly for stocks relative to control stocks. Our results are most consistent with an “informed trading” explanation, rather than “learning” or “governance” explanation. These have policy implications liberalization programs.