Factor Momentum in the Chinese Stock Market

Timing the factor zoo via deep learning: Evidence from China

“…Although the Chinese stock market is the second‐largest market worldwide, studies on factor timing are lacking. As the factor premia in China are rather large (Liu et al, 2019) and the market timing also performs well (Ma et al, 2021; Tang et al, 2021), our paper shows the superior performance of factor timing in China, extending the application of factor timing in emerging markets. The finding that the quality‐ and profitability‐related factors contribute most to the principal components also echoes their importance in China (Jiang et al, 2018).…”

“…It is meaningful to investigate the application of the investment strategy in another crucial market that is not the United States. Second, different from the US market, the factor premia are rather large and are not captured by retail investors in China (Liu et al, 2019), and the market timing also performs well here (Jiang et al, 2018; Ma et al, 2021; Tang et al, 2021). Therefore, these different conditionals help in the study of the factor timing strategy and may provide different evidence.…”