Size and Value Factors in China
An Empirical Test of a Revised Fama-French Three-factor Model with Chinese Characteristics
Authors
Fangzhou Gong1, †, Jingchi Guo2, *, †, Kuangtian Sun3, †
1School of Accountancy Shanghai University of Finance and Economics (SUFE) Shhanghai, China
2School of International Economics China Foreign Affairs University (CFAU) Beijing, China
3School of Finance Central University of Finance and Economics (CUFE) Beijing, China
†
These authors contributed equally.
Corresponding Author
Jingchi Guo
Available Online 26 March 2022.
- DOI
- 10.2991/aebmr.k.220307.002How to use a DOI?
- Keywords
- China; size; value; factors; E/P ratio
- Abstract
This paper evaluates the validity of a newly proposed three-factor model with Chinese characteristics in the recent Chinese stock market. For comparison purposes, we also conduct a test of the applicability of the classic Fama-French three-factor model (FF-3) and of the CAPM to the Chinese market. Our results show that the replacement of B/M ratio with E/P ratio indeed improves the explanatory power of the model, making the new three-factor model superior to FF-3 and CAPM. However, we do not observe a robust value effect, with size effect being only moderately detectable. We speculate that the existence of such an anomaly is due to a change of investment style in the recent Chinese stock market.
- Copyright
- © 2022 The Authors. Published by Atlantis Press International B.V.
- Open Access
- This is an open access article under the CC BY-NC license.
Cite this article
TY - CONF AU - Fangzhou Gong AU - Jingchi Guo AU - Kuangtian Sun PY - 2022 DA - 2022/03/26 TI - Size and Value Factors in China BT - Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022) PB - Atlantis Press SP - 5 EP - 14 SN - 2352-5428 UR - https://doi.org/10.2991/aebmr.k.220307.002 DO - 10.2991/aebmr.k.220307.002 ID - Gong2022 ER -