On the Predictability of Chinese Stock Returns

39 Pages Posted: 22 Mar 2007 Last revised: 3 Dec 2010

Xuanjuan Chen

Shanghai University of Finance and Economics

Kenneth Kim

SUNY at Buffalo - School of Management

Tong Yao

University of Iowa - Henry B. Tippie College of Business

Tong Yu

University of Cincinnati

Date Written: April 15, 2010

Abstract

We examine stock return predictability in China. We take 18 firm-specific variables that have been documented to predict cross-sectional stock returns in the U.S. and examine their relation with stock returns in China for the sample period from 1995 to 2007. We find relatively weak predictability for Chinese stocks. Only five firm-specific variables predict returns in the Chinese market. Tests on U.S. stock returns find more predictors can explain cross-sectional stock return variation. We test two explanations for the cause of weak returns predictability in China. First, perhaps return predictors in China are less heterogeneously distributed than they are in the U.S. Second, stock prices are less informative in China than they are in the U.S. We find support for both explanations.

Keywords: anomalies, return predictability, emerging markets, China

JEL Classification: G15

Suggested Citation

Chen, Xuanjuan and Kim, Kenneth and Yao, Tong and Yu, Tong, On the Predictability of Chinese Stock Returns (April 15, 2010). Available at SSRN: https://ssrn.com/abstract=972685 or http://dx.doi.org/10.2139/ssrn.972685

Xuanjuan Chen (Contact Author)

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, Shanghai 200433
China

Kenneth A. Kim

SUNY at Buffalo - School of Management ( email )

Jacobs Management Center
Buffalo, NY 14222
United States

Tong Yao

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

Tong Yu

University of Cincinnati ( email )

P.O. Box 210195
Cincinnati, OH 45221-0195
United States
4019548606 (Phone)
4019548606 (Fax)

Paper statistics

Downloads
246
Rank
100,875
Abstract Views
1,155