NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Fangzhou Lu

MIT Sloan
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Cambridge, MA 02142

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Institutional Affiliation: Massachusetts Institute of Technology

NBER Working Papers and Publications

February 2015The Real Value of China's Stock Market
with Jennifer N. Carpenter, Robert F. Whitelaw: w20957
China is the world’s largest investor and greatest contributor to global economic growth by wide margins, and will remain so for many years. The efficiency of its financial system in allocating capital to investment will be important to sustain this growth. This paper shows that China’s stock market has a crucial role to play. Since the reforms of the last decade, China’s stock market has become as informative about future corporate profits as in the US. Moreover, though it is a segmented market, Chinese investors price risk and other stock characteristics remarkably like investors in other large economies. They pay up for large stocks, growth stocks, and long shots, and they discount for illiquidity and market risk. China’s stock market no longer deserves its reputation as a casino. In ad...
 
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