Journal of Financial Economics Vol. 134 No. 1 2019
Size and value in China
open access
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.
- DOI
- 10.1016/j.jfineco.2019.03.008
- Volume
- 134
- Issue
- 1
- Pages
- 48-69
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib