Size and Value in China
Robert Stambaugh and
Yu Yuan ()
No 24458, NBER Working Papers from National Bureau of Economic Research, Inc
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)
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Published as Jianan Liu & Robert F. Stambaugh & Yu Yuan, 2019. "Size and Value in China," Journal of Financial Economics, .
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