An Empirical Cross-Section Analysis of Stock Returns on the Chinese A-Share Stock Market
Investment Management and Financial Innovations, 10(1), 127-136.
Posted: 8 Feb 2017
Date Written: 2013
Abstract
This study applied the Fama-French three-factor model (1993) and CAPM to examine A-shares in Chinese equity market from 1996 to 2005. The authors find a positive relation between book-to-market ratio and stock excess returns, and negative between size and stock excess returns. The results demonstrate that the Fama-French three-factor model is more accurate in predicting stock excess returns than the CAPM. The size effect is stronger than that of the book-to-market ratio (BTM). The results also suggest that stock profitability is related to size and BTM ratio in China’s stock market.
Keywords: asset pricing, cross-section analysis, three-factor model, firm size, book-to-market, Chinese A-share
JEL Classification: G10, G11, G12
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