China is the largest emerging market and attracts a great deal of attention from investors and researchers worldwide. The Fama-French three-factor model is the outcome of decades of research on U.S. stock returns. To what extent the three factors explain the variation in Chinese stock returns is an intriguing question. This paper documents empirical evidence on this issue and identifies some pitfalls that arise in the application of the three-factor model to Chinese stock returns. We find that several special features in China affect the three factors considerably and also influence the explanatory power of the three-factor model.
|Number of pages||18|
|Journal||China accounting and finance review (中國會計與財務硏究)|
|Publication status||Published - 2014|
- Chinese stock market
- Non-tradable shares
- Three-factor model
- Value premium