TY - JOUR T1 - China A-Shares: Strategic Allocation to Market and Factor Premiums JF - The Journal of Portfolio Management SP - 131 LP - 149 DO - 10.3905/jpm.2021.1.245 VL - 47 IS - 7 AU - Wilma de Groot AU - Laurens Swinkels AU - Weili Zhou Y1 - 2021/06/30 UR - https://pm-research.com/content/47/7/131.abstract N2 - The authors investigate the added value of strategically allocating to the Chinese A-shares equity market. Their results indicate a positive contribution to a portfolio that only considers traditional developed and emerging equity markets and bonds. The authors find that a diversified A-shares portfolio based on value, quality, and momentum factors exhibits 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.TOPICS: Fundamental equity analysis, emerging markets, analysis of individual factors/risk premia, portfolio constructionKey Findings▪ Investors need to decide how much to allocate to the China A-share market now that the market is opening up.▪ We find that a diversified A-shares factor portfolio based on value, quality, and momentum factors exhibits significantly better risk-adjusted performance than a passive A-shares market portfolio.▪ Benefits from a factor portfolio in China A-shares remain when incorporating conservative estimates of trading costs, which are relevant in presenting realistic investor returns. ER -