Testing for Structural Change in the Nontradable Share Reform of the Chinese Stock Market

We test for structural change in the Chinese stock-price level caused by the nontradable share (NTS) reform. Using the net-of-market-trend stock-price series, we found that the NTS reform drives stock prices up in more than two-thirds of the cases. For the twenty-oneâday window, the effect of the NTS reform is significant. Half of the stock prices have a shift right after readmission. It is also found that stocks with bonus-share distribution proportion between 15 percent and 20 percent are more likely to have a downward shift in price than those with other proportions.