Inclusions and Exclusions of Stocks in Cross-Border Investments: The Case of Stock Connect

Kin Ming Wong, Kwok Ping Tsang*

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review


    How does the market react when more or fewer investors are allowed to trade certain stocks? Stock Connect, a cross-border investment channel between mainland China and Hong Kong, provides a natural testing ground. Investors are allowed to trade a list of qualified stocks from the stock market on the other side, and when a stock is removed from the list, investors can only sell but cannot buy that stock. We find that the inclusion of stocks is correlated with abnormal returns, implying downward-sloping demand curves for stocks. The effect weakens over time and disappears in about 40 trading days. There are no abnormal returns when stocks are removed from the list. On the other hand, when investors can only sell some stocks, they have a significantly higher propensity to sell. Their trading style becomes more contrarian for such stocks, and they tend to trade in small amounts. After 6 months, their investment behavior returns to that before the removal.

    Original languageEnglish
    Pages (from-to)701–727
    Number of pages27
    JournalAsia-Pacific Financial Markets
    Issue number4
    Early online date29 Nov 2022
    Publication statusPublished - Dec 2023

    Scopus Subject Areas

    • Finance

    User-Defined Keywords

    • Cross-border investment
    • Demand curves for stocks
    • Slow moving capital
    • Stock connect


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