Size and Value in China

Jianan Liu, Robert Stambaugh and Yu Yuan ()

No 24458, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G12 G15 G18 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-cna and nep-tra
Note: AP
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Citations: View citations in EconPapers (6)

Published as Jianan Liu & Robert F. Stambaugh & Yu Yuan, 2019. "Size and Value in China," Journal of Financial Economics, .

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