Is the capital floating from Hong Kong to Mainland China smart?

Abstract

This paper uses the methods of portfolio analysis, sharpe ratio, market value size grouping, and asset pricing model to study whether Northbound Capitals are smart funds. The results show that the return rate of Northbound capital outflow of stocks underperforms the index, while the return rate of continuous inflow stocks outperforms the index, and large-scale market capitalization stocks have received the highest returns. Also, this paper finds that the stocks that continue to flow in Northbound Capital have significant excess returns. Therefore, Chinese investors can learn from the investment methods of Northbound Capital to improve their investment level.