Size and value in China

Jianan Liu, Robert Stambaugh and Yu Yuan

Journal of Financial Economics, 2019, vol. 134, issue 1, 48-69

Abstract: We construct size and value factors in China. The size factor excludes the smallest 30% of firms, which are companies valued significantly as potential shells in reverse mergers that circumvent tight IPO constraints. The value factor is based on the earnings-price ratio, which subsumes the book-to-market ratio in capturing all Chinese value effects. Our three-factor model strongly dominates a model formed by just replicating the Fama and French (1993) procedure in China. Unlike that model, which leaves a 17% annual alpha on the earnings-price factor, our model explains most reported Chinese anomalies, including profitability and volatility anomalies.

Keywords: China; Size; Value; Factors; Anomalies (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (163)

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Working Paper: Size and Value in China (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:134:y:2019:i:1:p:48-69

DOI: 10.1016/j.jfineco.2019.03.008

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