Based on the Convergence and Re-Differentiation of the Premium of Hong Kong Stocks in the HSAHP

Abstract

This article uses the Hang Seng Shanghai-Hong Kong Stock Connect A/H Premium Index (HSAHP) as a uniform standard to study the data from 2016 to 2025. On this basis, key mechanisms such as liquidity, investor structure, discounting system, and institutional channels are mapped to market performance, and an analysis framework of mechanism - criterion - stage is constructed. The results show that during the formation and expansion stage of the connectivity mechanism, the closeness of the index around 100 improves, and the fluctuation range narrows, reflecting the improvement of accessibility and market depth. After the index inclusion and the strengthening of passive fund allocation, the probability of convergence of the crossmarket discounting system increases. During the normal operation period, the increase in the ratio of A/H trading volume within a short window is often accompanied by the widening of the cross-sectional premium. Based on these observations, this paper provides a practical monitoring approach. That is, by tracking the interrelated changes in Amihud Illiquidity Measure, bid-ask spreads, and trading volume depth to identify convergence conditions, combining the changes in passive funds and the weights of overseas institutions to determine the direction of the discount difference, and increasing vigilance for the re-differentiation of bid-ask spreads during periods of significantly increasing trading volume ratios. This framework provides a clear entry point for subsequent rolling tests and bandwidth sensitivity analyses conducted using a unified approach.