The Fama-French Three Factors in Chinese Stock Market

China Accounting and Finance Review, 2014, Volume 16, Issue 2, 210-227

18 Pages Posted: 21 Dec 2013 Last revised: 8 Dec 2014

See all articles by Jin (Karen) Xu

Jin (Karen) Xu

Shanghai International Studies University

Shaojun Zhang

Hong Kong Polytechnic University

Date Written: March 2, 2014

Abstract

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.

Keywords: Chinese stock market; Non-tradable shares; Three-factor model; Value premium

JEL Classification: G11, G12, G15

Suggested Citation

Xu, Jin and Zhang, Shaojun, The Fama-French Three Factors in Chinese Stock Market (March 2, 2014). China Accounting and Finance Review, 2014, Volume 16, Issue 2, 210-227, Available at SSRN: https://ssrn.com/abstract=2367908 or http://dx.doi.org/10.2139/ssrn.2367908

Jin Xu

Shanghai International Studies University ( email )

1550 Wen Xiang Rd.
Songjiang District
Shanghai, Shanghai 201620
China

Shaojun Zhang (Contact Author)

Hong Kong Polytechnic University ( email )

Hung Hom, Kowloon
Hong Kong

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