2011
DOI: 10.5539/ijef.v3n3p26
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The Value and Size Effect — Are There Firm-Specific-Risks in China’s Domestic Stock Markets?

Abstract: The Fama-French three-factor asset pricing formula is applied to the Chinese A-share markets: Shanghai and Shenzhen Stock Exchanges (SSE and SZSE). The benchmark explanatory returns-value and size premiums are constructed and adopted in the cross-sectional regressions. Market beta has no explanatory power. There are some evidences of the value effect only for the SSE. No significant size effect was found. The results are robust with or without the influences of the exchange rate reform and the recent financial… Show more

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Cited by 13 publications
(8 citation statements)
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“…Consistent with our results, Wang and Xu () and Hilliard and Zhang () also find no value effect in the Chinese stock market. On another hand, some of the existing literature document significant value effect, including Cakici et al (), Chen et al (), Carpenter et al (), Cakici et al (), Cheung et al (), Wang and Di Iorio (), Wong et al (), Wu (), Eun and Huang (), Huang and Yang (), Chen et al (), and Morelli ().…”
Section: Robustnessmentioning
confidence: 99%
See 2 more Smart Citations
“…Consistent with our results, Wang and Xu () and Hilliard and Zhang () also find no value effect in the Chinese stock market. On another hand, some of the existing literature document significant value effect, including Cakici et al (), Chen et al (), Carpenter et al (), Cakici et al (), Cheung et al (), Wang and Di Iorio (), Wong et al (), Wu (), Eun and Huang (), Huang and Yang (), Chen et al (), and Morelli ().…”
Section: Robustnessmentioning
confidence: 99%
“…These papers include Cakici, Chan, and Topyan (), Chen et al (), Carpenter et al (), Wang and Xu (), Cakici, Chatterjee, and Topyan (), Hilliard and Zhang (), Cheung et al (), Wang and Di Iorio (), Wong et al (), Wu (), Eun and Huang (), Huang and Yang (), Chen et al (), Morelli (), and so forth. We will discuss these papers in more detail later.…”
mentioning
confidence: 99%
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“…Elliott and Yan (2013) document extremely high average annual turnover rate in the Chinese stock markets during 2008-2012, average 341% (as high as 666%) when only floating shares are considered, compared to the US rate of 188%. Researchers (Xiao, 2006;Lim and Brooks, 2009;Chen, et al, 2010) examining stock valuations in China generally find little relationship to company fundamentals; investors tend to speculate more like noise traders in a casino fashion; and stock prices are less informative in China than they are in the U.S. Wu (2011) finds that neither size nor market factor matters in valuation, also the value effect is limited only for the SSE listed stocks. Goldstein, et al (2013) show "theoretically that undesirable coordination across speculators makes the market less informative, decreases real investment, and increases stock market volatility."…”
Section: Introduction and Reviewmentioning
confidence: 99%
“…Amel‐Zadeh (2011) reveals that the marginal effect of firm size on stock returns is conditional on the firm's past performance which suggests that size captures components of firm characteristics in stock returns that cannot be explained by differences in systematic risk. By contrast, Wu (2011) makes use of the Fama–French three‐factor asset pricing model in the case of Chinese A‐share markets to show no significant size effect. Shubita and Al‐Sharkas (2012) evaluate the ‘size‐effect’ utilizing a relatively large sample of NYSE stock prices to show that size impacts stock returns.…”
Section: Literature Reviewmentioning
confidence: 97%