NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Size and Value in China

Jianan Liu, Robert F. Stambaugh, Yu Yuan

NBER Working Paper No. 24458
Issued in March 2018, Revised in December 2018
NBER Program(s):Asset Pricing

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.

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Document Object Identifier (DOI): 10.3386/w24458

Published: Jianan Liu & Robert F. Stambaugh & Yu Yuan, 2019. "Size and Value in China," Journal of Financial Economics, .

 
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