Anomalies in Chinese A-Shares

Anomalies in the China A-share market

“…Accruals (ACC and TOTAL ACC) and NOA are also weak anomalies in our sample. This is consistent with Hsu et al (2018) and Qiao ( 2019), who also do not find that these quality variables are associated with positive excess returns. Li et al (2011) report weak evidence for the accruals anomaly in China.…”

“…The 12-1 month momentum strategy generates a 0.33% per month return (t-statistic 17 Source: https://www.economist.com/finance-and-economics/2001/03/01/sauna-sleaze 0.92) for the equally weighted portfolio and a 0.35% (t-statistic 0.79) for the value-weighted portfolio. The weak return on momentum strategies is consistent with the existing literature; Chen et al (2010), Cheung et al (2015), Cakici et al (2017), Hsu et al (2018), Qiao (2019), Chui et al (2020), and Fang and Olteanu-Veerman (2020) find no momentum effect for the China A-shares market. 18 The lack of momentum is generally attributed to high turnover in Chinese markets shortening the period over which cycles of overreaction and subsequent correction occurs.…”

“…Our set of firm characteristics that we examine is based on prior literature in the China A-share market, such as Hsu et al (2018) and Liu et al (2019). We supplement these series with variables that have been used in other studies that focus on the China A-share market, and extend with a few characteristics that are promising based on research on developed markets, but have not yet been investigated for China A-shares.…”

“…For GP and OP, the frequency of updating seems to matter a lot for the results. Hsu et al (2018) andQiao (2019) show that GP and OP have about zero excess returns with an annual update, but Qiao (2019) finds about 1% excess return per month when using quarterly data. We use trailing twelve month values and update quarterly.…”

Forecasted E/P Ratio and ROE: Shanghai Stock Exchange (SSE), China

“…They acknowledged that it is treated as an order-driven market, strict initial public offering (IPO) process, the dominance of individual investors, invest only in "A" type of stocks, asymmetric information prevails in market and decision regarding the size of market done by the government. Few pieces of research considered earning to price (E/P) ratio as value measure due to unique market features and findings were diverse such as Cakici et al (2017), Hsu et al (2018), Zhang et al (2018), and Jianan Liu et al (2019) documented a significant effect while Hu et al (2019) and Chen et al (2010) reported an insignificant presence of value measure. Zhang et al (2018) and Jianan Liu et al (2019) explored that the E/P ratio as a value measure is a better and comprehensive proxy to represent the Chinese stock market due to the mentioned unique features compared to the world's other stock markets.…”