The salience theory of choice under risk shows that investor behavior drives cross-sectional cryptocurrency returns. Investors place too much weight on salient payouts, causing overvaluation of cryptocurrencies with upward salience returns and undervaluation of those with downward salience returns, leading to negative expected returns for the former and positive expected returns for the latter. The salience effect in the cryptocurrency market is more pronounced than in equity markets, making it a significant risk factor for explaining other cross-sectional returns in the cryptocurrency market. Unlike other documented return predictors, the salience theory uniquely contributes to understanding the cryptocurrency market.

We develop a non-linear Markov error correction approach to examine the general co-integration relation between the H- and A-prices of cross-listed Chinese stock issuers across the period January 1999 to March 2009. We unravel three important dimensions of this relation. These pertain to (i) the long-run expectation of the H- (to A-price) discount; (ii) the level of short-run co-movement in prices; and (iii) the magnitude of error corrections. Findings point to significant improvements in all three areas. Policy and corporate governance change appears to be the principal force driving the efficiency gains. Weakening informational asymmetries underlie much of the change in the markets’ relative pricing. In contrast, sentiment effects strongly underpin the contemporaneous response and error correction adjustments. Finally, the escalating Global Financial Crisis of 2008 appears to have not only bolstered the A- and H-markets’ short-term pricing dynamic but also temporarily increased the long-term H-share discount.