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Anomalies in Chinese A-Shares

49 Pages Posted: 20 Apr 2017 Last revised: 1 May 2017

Jason C. Hsu

Rayliant Global Advisors; Research Affiliates, LLC; University of California, Los Angeles - Anderson School of Business

Vivek Viswanathan

Rayliant Global Advisors

Chenhui Wang

Rayliant Global Advisors

Phillip Wool

Rayliant Global Advisors

Date Written: April 30, 2017

Abstract

We apply well-studied factor strategies from the U.S. equity anomalies literature to Chinese A-shares, demonstrating which factors have worked and which have not over the last two decades since the opening of China’s stock markets. We find while a number of traditional factors like value and size appear to work well in China, other factors are less effective, including A-shares momentum which works in the opposite direction. Our analysis reconciles conflicting results from the prior A-shares anomalies literature and explains differences in U.S. and Chinese factor investing experiences on the basis of unique features of China’s evolving investing landscape, including issues related to regulation, financial reporting standards, differences in market microstructure, and investor behavior. After reviewing evidence on the performance of specific factor strategies applied to A-shares, we demonstrate ways in which a deep institutional knowledge of China’s financial markets leads to more effective investment strategies through factor design and portfolio construction tailored to novel features of A-shares. Our findings will be of interest to researchers of equity anomalies and to those developing quantitative strategies for Chinese equities.

Keywords: Factors; anomalies; China

JEL Classification: G14; G15

Suggested Citation

Hsu, Jason C. and Viswanathan, Vivek and Wang, Chenhui and Wool, Phillip, Anomalies in Chinese A-Shares (April 30, 2017). Available at SSRN: https://ssrn.com/abstract=2955144 or http://dx.doi.org/10.2139/ssrn.2955144

Jason Hsu

Rayliant Global Advisors ( email )

Hong Kong

Research Affiliates, LLC ( email )

620 Newport Center Dr
Suite 900
Newport Beach, CA 92660
United States

HOME PAGE: http://www.jasonhsu.org

University of California, Los Angeles - Anderson School of Business

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Vivek Viswanathan (Contact Author)

Rayliant Global Advisors ( email )

Hong Kong

Chenhui Wang

Rayliant Global Advisors ( email )

Hong Kong

Phillip Wool

Rayliant Global Advisors ( email )

Hong Kong

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