Project--Advanced Financial Economics

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1、TermProjectfor“SelectedTopicsinFinancialEconomics”WeiXiongThedualsharesofChinesefirmslistedinsideandoutsideChinaofferauniqueopportunitytostudyhowlocalandforeigninvestorsreacttopublicnews.AsetofChinesefirmshaveshareslistedinA-sharemarketsinsideChinaandinH-sharemarketstradedinHongK

2、ong,whileanothersetofChinesefirmshaveshareslistedinA-sharemarketsandinN-sharemarketstradedinNewYork.Pleasefollowthestepsoutlinedbelowtoanalyzetheresponsesofthesesharestothefirms’annualearningsannouncements.1.FindthesetoffirmswithdualsharesinA-shareandH-sharemarketsin2000-2012andt

3、hesetoffirmswithdualsharesinA-shareandN-sharemarketsinthesameperiod.Listthenamesofthesefirmstogetherwiththelistingperiodforeachshare.Notethatafirmmightlistthelocalandforeignsharesatdifferenttimes.Reportthelistingdateforbothshares.Forthefollowinganalysis,usetheperiodwhenbothshares

4、arelisted.2.Findeachfirm’sannualearningsannouncementsinthesampleperiodandtheanalyst’sconsensusforecastsbeforetheannouncements.Therearetwowaystomeasurethesurpriseineachannouncement,onebasedonthedifferencebetweentheannouncedearningspershare(EPS)andtheconsensusforecastandtheotherbas

5、edonthedifferencebetweentheannouncedEPSandthepreviousyear’sEPS.Tomakethesurprisecomparableacrossfirms,normalizethesurprisebythefirm’sshareprice(moreprecisely,theaveragepriceoflocalandforeignshares)threedaysbeforetheannouncement.NotethatH-sharepricesareinHongKongdollarandN-sharepr

6、icesareinUSdollar.YouneedtoconvertthemintoYuan.Anannouncementisdefinedasgoodnewsifthesurpriseispositiveandbadnewsotherwise.3.ComputeCAR(-1,2)thecumulativeabnormalreturnsofbothlocalandforeignsharesfromonedaybeforetotwodaysaftereachannouncement.Youshoulduseastandardmarketmodelbyreg

7、ressingthereturnofashareduringthisperiodonbothlocalandforeignmarketindices.4.Reportinatabletheannouncementdate,announcedEPS,consensusforecast,thetwomeasuresofsurprise(afternormalization),andCAR(-1,2)ofeachshareforeachannualearningsannouncementinthesample.5.Comparetheaveragereturn

8、oflocalandforeignsharesingood-newssample