TY - JOUR
T1 - Factor models for Chinese A-shares
AU - Hanauer, Matthias X.
AU - Jansen, Maarten
AU - Swinkels, Laurens
AU - Zhou, Weili
N1 - Publisher Copyright:
© 2023 The Authors
PY - 2024/1
Y1 - 2024/1
N2 - We compare the performance of commonly employed asset pricing models on a large, liquid, but mostly segmented Chinese A-shares equity market. When restricting ourselves to factor models developed for the U.S. equity market, the q-factor model performs well. However, it is outperformed by a modified Fama-French six-factor model and by a four-factor asset pricing model tailored to the Chinese A-shares market. A data-driven method results in a seven-factor model, however the ranking of asset pricing models changes when we incorporate transaction costs. Both direct and data-driven model comparison methods now lead to a three-factor model comprising a market, size, and earnings-based value factor.
AB - We compare the performance of commonly employed asset pricing models on a large, liquid, but mostly segmented Chinese A-shares equity market. When restricting ourselves to factor models developed for the U.S. equity market, the q-factor model performs well. However, it is outperformed by a modified Fama-French six-factor model and by a four-factor asset pricing model tailored to the Chinese A-shares market. A data-driven method results in a seven-factor model, however the ranking of asset pricing models changes when we incorporate transaction costs. Both direct and data-driven model comparison methods now lead to a three-factor model comprising a market, size, and earnings-based value factor.
UR - https://dx.doi.org/10.2139/ssrn.3918833
UR - http://www.scopus.com/inward/record.url?scp=85174854509&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2023.102975
DO - 10.1016/j.irfa.2023.102975
M3 - Article
SN - 1057-5219
VL - 91
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 102975
ER -