Finance
The China-U.S. Equity Valuation Gap
25 October 2023 | 10:30p.m.-12:00p.m
KK 1121, K. K. Leung Building, HKU
Speaker:
Prof. Xiaoyan Zhang
Xinyuan Chair Professor of Finance
Associate Dean
PBC School of Finance
Tsinghua University
Abstract:
The Chinese earnings yield differential relative to the U.S. switches from negative to positive around 2009, with the aggregate variation masking substantial cross-sector variation. Changes in sectoral composition and (changing) growth expectations are not important determinants of the variation in China-U.S. valuation differentials. Instead, changes in ownership structure, and most importantly cross-sectional and temporal variation in financial openness, are the key contributors. In addition, we show that IPOs in the banking sector and its internationalization played a critical role in the (relative) valuation change.
