The Hong Kong equity market and an institutional framework for asset pricing

Given the potential implications of market structure for asset pricing, this paper examines the structural and institutional features of the Hong Kong equity market and their relevance to explaining market behaviour. It was found that the Hong Kong market appears less perfect and hence less efficient than their counterparts in the more developed economies, such as the USA and the UK, so that market disequilibrium and asset mispricing might have occurred. This paper adds value to the literature as the findings provide an institutional framework for analysing and explaining the results from empirical asset pricing work, past and future, on the Hong Kong market. This has far-reaching implications for financial decisions.