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Size and Value in China

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Listed:
  • Jianan Liu
  • Robert F. Stambaugh
  • Yu Yuan

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.

Suggested Citation

  • Jianan Liu & Robert F. Stambaugh & Yu Yuan, 2018. "Size and Value in China," NBER Working Papers 24458, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24458
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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