Size, book/market ratio and risk factor returns: evidence from China A‐share market
Abstract
Purpose
The purpose of this paper is to investigate the risk factors for A‐shares listed on both Shenzhen and Shanghai Stock Exchange in China using variables from Akgun and Gibson.
Design/methodology/approach
The paper applies cross‐sectional regression on the orthogonal components by rearranging these risk variables into several principal components.
Findings
The results produced strong evidence that size and book‐to‐market (BM) ratio could be well explained by these alternative risk variables. Additionally, the alternative variables are better at explaining returns in terms of adjusted R‐squares.
Practical implications
The practical implication of the study is that investors can improve both their pricing of the investment risk and their management of the risk factors with the alternatives identified in the study.
Originality/value
The paper provides evidence in explaining the size and BM effects in China's stock markets.
Keywords
Citation
Chen, J., Leong Kan, K. and Anderson, H. (2007), "Size, book/market ratio and risk factor returns: evidence from China A‐share market", Managerial Finance, Vol. 33 No. 8, pp. 574-594. https://doi.org/10.1108/03074350710760304
Publisher
:Emerald Group Publishing Limited
Copyright © 2007, Emerald Group Publishing Limited