Abstract: We study the effect of the Shanghai-Hong Kong Stock Connect program on market efficiency in China. Applying a difference-in-differences model, we find that connected firms experience a higher about 4% price impact and significantly increased turnover, liquidity, and volatility in 20 days following the announcement. Our results support the evidence that investors demand a premium for volatility risk. Furthermore, in the Shanghai market, the participation of Hong Kong investors helps reduce the volatility of connected stocks, while in the Hong Kong market, the participation of Shanghai investors increases the volatility. The finding of this cross-market variation is consistent with the heterogeneity of investors’ trading behavior across different markets and reflects the existence of risk spillovers between those two markets. The price revaluation and risk spillovers illustrate that the implementation of the program has greatly improved the efficiency of the Chinese market.