Factor models for Chinese A-shares

Matthias X. Hanauer, Maarten Jansen, Laurens Swinkels and Weili Zhou

International Review of Financial Analysis, 2024, vol. 91, issue C

Abstract: We compare the performance of commonly employed asset pricing models on a large, liquid, but mostly segmented Chinese A-shares equity market. When restricting ourselves to factor models developed for the U.S. equity market, the q-factor model performs well. However, it is outperformed by a modified Fama-French six-factor model and by a four-factor asset pricing model tailored to the Chinese A-shares market. A data-driven method results in a seven-factor model, however the ranking of asset pricing models changes when we incorporate transaction costs. Both direct and data-driven model comparison methods now lead to a three-factor model comprising a market, size, and earnings-based value factor.

Keywords: Anomalies; Asset pricing; China; Equity markets; Emerging markets; Factor models; Investing (search for similar items in EconPapers)
JEL-codes: C58 D53 G11 G12 G15 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:91:y:2024:i:c:s105752192300491x

DOI: 10.1016/j.irfa.2023.102975

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