Decomposition of book-to-market and the cross-section of returns for Chinese shares

Nusret Cakici, Sris Chatterjee and Kudret Topyan

Pacific-Basin Finance Journal, 2015, vol. 34, issue C, 102-120

Abstract: In this paper, we show that the book-to-market decomposition described in Fama–French (2008) significantly improves the predictive power of the estimation for an important emerging market, viz, Chinese shares. Second, we show that this improvement comes mainly from the change in book equity and not from the change in price. The predictive power of the change in book equity is most pronounced for large stocks, for stocks listed on Shenzhen Exchange, for stocks with low book-to-market (or growth stocks), and for Class B shares. Net Share Issue and Momentum add no explanatory power to the predictive regressions.

Keywords: Chinese stocks; Book-to-market decomposition; Emerging markets; Fama–French; Predictive regression (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:34:y:2015:i:c:p:102-120

DOI: 10.1016/j.pacfin.2015.05.004

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