Anomalies in Chinese A-Shares

Abstract

In this article, the authors 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. They find that although a number of traditional factors such as value and size appear to work well in China, other factors are less effective—including A-shares momentum, which works in the opposite direction. Their 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. Their findings will be of interest to researchers of equity anomalies and those developing quantitative strategies for Chinese equities.

TOPICS: Analysis of individual factors/risk premia, developed, fundamental equity analysis