The influence of the COVID-19 pandemic on asset-price discovery: Testing the case of Chinese informational asymmetry

The circumstances surrounding the outbreak of the COVID-19 pandemic have generated substantial international political strain as governments attempt to mitigate the widespread associated social and economic repercussions. One theory has focused on the potential for Chinese informational asymmetry. Using Chinese financial market data, we attempt to establish the scale and direction of information flows during multiple distinct phases of the development of the pandemic. Two specific results are identified. Firstly, the majority of domestically-traded Chinese stocks present evidence of significant information flows at a far earlier stage than internationally-traded comparatives, suggesting that domestic investors recognised the dangers associated with COVID-19 far in advance of the rest of the world. One potential explanation surrounds the view that the severity of domestically-reported Chinese news was not appropriately recognised by international investors. Secondly, while evidence of safe-haven and flight-to-safety behaviour is evident throughout traditional energy and precious metal markets, cryptocurrencies became informationally-synchronised with Chinese equity markets, indicating their use as an investor safe-haven. This is a particularly concerning outcome for international policy-maker and regulatory authorities due to the fragility of these developing markets.


Table A1 :
Descriptive statistics of return series (5-min data, high frequency robustness testing) Returns are calculated by taking the first differences of logarithmic prices.SSEA is the Shanghai Stock Exchange A-share index; SSEB is the Shanghai Stock Exchange B-share index.Oil, the Chinese crude oil commodity futures traded in the Shanghai International Energy Exchange; Gold, the Chinese gold commodity futures; Corn, the Chinese corn commodity futures; Bitcoin, bitcoin traded in the Bitstamp cryptocurrency exchange; US dollar, US dollar currency index.STD denotes standard deviation.JB test is the Jarque-Bera normality test.E stands for scientific notation.

Table A2 :
Two-state regime switching model, SSEA (Estimation from data at 5-min intervals) This table reports the estimation result of the two-state regime switching model.Estimation is done for five sample pairs consisting of one Shanghai Stock Exchange A-or B-share index and one commodity asset and results are separately shown.Coef.denotes model coefficients.SSEA index is the Shanghai Stock Exchange Ashare index; SSEB index is the Shanghai Stock Exchange B-share index.Hansen (1992)'s standardised likelihood ratio test is employed to test the existence of regimes and associated p-value of test statistic is shown.E stands for scientific notation.Figures in parentheses are p values of significance check.***, ** and * represent significance at the 1%, 5% and 10%, respectively.

Table A3 :
Two-state regime switching model, SSEB (Estimation from data at 5-min intervals) This table reports the estimation result of the two-state regime switching model.Estimation is done for five sample pairs consisting of one Shanghai Stock Exchange A-or B-share index and one commodity asset and results are separately shown.Coef.denotes model coefficients.SSEA index is the Shanghai Stock Exchange Ashare index; SSEB index is the Shanghai Stock Exchange B-share index.Hansen (1992)'s standardised likelihood ratio test is employed to test the existence of regimes and associated p-value of test statistic is shown.E stands for scientific notation.Figures in parentheses are p values of significance check.***, ** and * represent significance at the 1%, 5% and 10%, respectively.

Table A4 :
Logarithmic ratios of static information share measures at 5-min intervals: Ratios of information share measures between SSEA index and other assets Note: Logarithmic ratios of information share measures are calculated as the natural logarithms of ratios of static information share measures of Shanghai Stock Exchange A and B-share indices over the other five assets.CS, component share; IS, information share; ILS, information leadership share.Static information share measures are calculated based on estimates of the VECM at each Sub-period.SSEA index is the Shanghai Stock Exchange A-share index; SSEB index is the Shanghai Stock Exchange B-share index.Diff.represents the result of subtraction in ratios.

Table A5 :
Logarithmic ratios of static information share measures at 5-min intervals: Ratios of information share measures between SSEB index and other assets Logarithmic ratios of information share measures are calculated as the natural logarithms of ratios of static information share measures of Shanghai Stock Exchange A and B-share indices over the other five assets.CS, component share; IS, information share; ILS, information leadership share.Static information share measures are calculated based on estimates of the VECM at each Sub-period.SSEA index is the Shanghai Stock Exchange A-share index; SSEB index is the Shanghai Stock Exchange B-share index.Diff.represents the result of subtraction in ratios.

Table A6 :
Means and standard deviations of logarithmic ratios of time varying information share measures at 5-min intervals, Ratios of information share measures between SSEA index and other assets Logarithmic ratios of information share measures are calculated as the natural logarithms of ratios of time varying information share measures of Shanghai Stock Exchange A and B-share indices over the other five assets.CS, component share; IS, information share; ILS, information leadership share.Time varying information share measures are computed based on time varying error correction coefficients from a rolling window procedure as well as the variance-covariance matrix of innovations derived from a two-state regime switching model.SSEA index is the Shanghai Stock Exchange A-share index; SSEB index is the Shanghai Stock Exchange B-share index.STD is standard deviation.Diff.represents the result of subtraction in means.F-stat denotes the F test statistic for the hypothesis testing on equality between means of different Sub-periods.*** denotes significance at the 1% level.

Table A7 :
Means and standard deviations of logarithmic ratios of time varying information share measures at 5-min intervals, Ratios of information share measures between SSEB index and other assets Logarithmic ratios of information share measures are calculated as the natural logarithms of ratios of time varying information share measures of Shanghai Stock Exchange A and B-share indices over the other five assets.CS, component share; IS, information share; ILS, information leadership share.Time varying information share measures are computed based on time varying error correction coefficients from a rolling window procedure as well as the variance-covariance matrix of innovations derived from a two-state regime switching model.SSEA index is the Shanghai Stock Exchange A-share index; SSEB index is the Shanghai Stock Exchange B-share index.STD is standard deviation.Diff.represents the result of subtraction in means.F-stat denotes the F test statistic for the hypothesis testing on equality between means of different Sub-periods.*** denotes significance at the 1% level.