The real value of China’s stock market

Abstract What capital allocation role can China’s stock market play? Counter to perception, prices in China have become as informative about future profits they are the US. This rise price informativeness has coincided with an increase investment efficiency among privately owned firms, suggesting is aggregating information and providing useful signals managers. However, for state-owned enterprises fell below that of firms after postcrisis stimulus, perhaps reflecting unpredictable subsidies state-directed policy. Finally, evidence from realized returns suggests Chinese face a higher cost equity than US firms.