A comparison of China's main board and growth enterprise market board - Market microstructure approach

William Cheung*, Kejing Liu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)


We compare the market quality of the newly established, second board of the China stock market, the Growth Enterprise Market (GEM) with the Main Board, and examine its impact on the Main Board from the market microstructure perspective. Using the newly available transaction level data, several findings emerge. First, trading activities of the Main Board stocks increase after the introduction of GEM Board, suggesting that the establishment of GEM is not at the expense of the Main Board but instead enhance the overall trading activities in China. Pricing error variances are not different in the two Boards, while GEM stocks have larger adverse selection cost component of bid-ask spread and higher probability of information-based trading which indicate a larger information asymmetry among traders, on average in GEM stocks than those in the Main Board. Interestingly, we find that the 15 min returns of Main Board stocks strongly lead that of GEM stocks but the GEM board only weakly leads Main Board, evidencing information transmission from the Main Board to the GEM. Overall, our findings suggest that the market quality of the GEM is sufficiently good to provide an important, alternative listing venue for high potential firms in China.

Original languageEnglish
Article number1450007
JournalReview of Pacific Basin Financial Markets and Policies
Issue number2
Publication statusPublished - 2014 Jun
Externally publishedYes


  • China growth enterprise market
  • information asymmetry
  • market quality
  • pricing error

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


Dive into the research topics of 'A comparison of China's main board and growth enterprise market board - Market microstructure approach'. Together they form a unique fingerprint.

Cite this