China A-Shares: Strategic Allocation to Market and Factor Premiums

Forthcoming, Journal of Portfolio Management

38 Pages Posted: 22 Oct 2020

See all articles by Wilma de Groot

Wilma de Groot

Robeco Asset Management

Laurens Swinkels

Erasmus University Rotterdam (EUR); Robeco Asset Management

Weili Zhou

Robeco Asset Management

Date Written: September 21, 2020

Abstract

We investigate the added value of strategically allocating to the Chinese A-shares equity market. Our results indicate a positive contribution to a portfolio which only considers traditional developed and emerging equity markets and bonds. We find that a diversified A-shares portfolio based on value, quality, and momentum factors exhibits a significantly better risk-adjusted performance than the passive A-shares market portfolio. Consequently, allocating to Chinese A-share factor premiums significantly improves the efficient frontier. The conclusions remain similar when incorporating conservative estimates of trading costs or when constructing value-weighted portfolios, which represent more realistic investor returns.

Keywords: Alpha, China, A-shares, Factor investing, Investing, Momentum, Value

JEL Classification: F10, G10

Suggested Citation

de Groot, Wilma and Swinkels, Laurens and Zhou, Weili, China A-Shares: Strategic Allocation to Market and Factor Premiums (September 21, 2020). Forthcoming, Journal of Portfolio Management, Available at SSRN: https://ssrn.com/abstract=3702965 or http://dx.doi.org/10.2139/ssrn.3702965

Wilma De Groot

Robeco Asset Management ( email )

Rotterdam, 3014 DA
Netherlands
+31 10 224 3107 (Phone)

Laurens Swinkels (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Robeco Asset Management ( email )

Rotterdam, 3000
Netherlands
+31 10 224 2470 (Phone)
+31 10 224 2110 (Fax)

Weili Zhou

Robeco Asset Management ( email )

Rotterdam, 3011 AG
Netherlands
+31-10-2242222 (Phone)

HOME PAGE: http://www.robeco.com/quant

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