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The Value Effect and the Market For Chinese Stocks

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  • Burton G. Malkiel

    (Princeton University)

  • Derek Jun

    (Old Square Capital Advisors)

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    Abstract

    A long literature in empirical finance has isolated both a value and a small-capitalization effect in asset pricing. This study confirms the existence of these style effects both in new types of equity indexes and in the stocks of Chinese companies traded in international markets. We then present a new nonparametric method of portfolio construction that enables investors to extract the predictive power of these style effects, without diluting their efficacy through an unintended weighting distribution that closely resembles capitalization weighting. We then develop a simple method to isolate periods where style tilts are likely to be particularly effective.

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    File URL: http://www.princeton.edu/~ceps/workingpapers/188malkiel.pdf
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    Bibliographic Info

    Paper provided by Princeton University, Department of Economics, Center for Economic Policy Studies. in its series Working Papers with number 1177.

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    Date of creation: Jul 2009
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    Handle: RePEc:pri:cepsud:1177

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    Keywords: China; stock market; capitalization; stock portolios; equity index;

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