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Do stocks outperform bank deposits in China?

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  • Huang, Jiexiang
  • Guo, Wei
  • Zhang, Jin E.

Abstract

This paper investigates whether stocks outperform risk-free assets in the US and China in terms of buy-and-hold returns over different horizons. We find that stock returns underperform the one-month bank deposit rate in the Chinese market, consistent with the finding of Bessembinder (2018) that the returns to the majority of common stocks are less than one-month Treasuries. The paper explores the important role of positive skewness in the distribution of individual stock returns, attributable to skewness in monthly returns. These results further emphasize the importance of portfolio diversification in the Chinese market.

Suggested Citation

  • Huang, Jiexiang & Guo, Wei & Zhang, Jin E., 2020. "Do stocks outperform bank deposits in China?," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:pacfin:v:64:y:2020:i:c:s0927538x20306764
    DOI: 10.1016/j.pacfin.2020.101464
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    References listed on IDEAS

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    1. Masaya Sakuragawa & Kaoru Hosono, 2010. "Fiscal Sustainability Of Japan: A Dynamic Stochastic General Equilibrium Approach," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 517-537, December.
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    More about this item

    Keywords

    Individual stock returns; Return skewness; Buy-and-hold returns; Chinese market;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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