Misvaluation comovement, market efficiency and the cross-section of stock returns: Evidence from China

Market frictions and momentum premium: does stock mispricing matter? Evidence from China

“…Empirically, Hirshleifer and Jiang (2010) are the first to propose misvaluation as risk factor built on longing undervalued stocks and short‐selling overvalued stocks and confirm that misvaluation measure strongly predicts stock returns. Since then, numerous studies have examined the effect of the misvaluation as a factor mimicking portfolios in asset pricing (Chang et al., 2013; Jaffe et al., 2020; Luo et al., 2015).…”

“…However, the Chinese financial market—as being still characterized with its speculative nature, prevalence of young and inexperienced retail investors and limits to arbitrage (Han & Li, 2017)—still represents an interesting case to assess the behavior of asset prices. Second, the existing literature indeed offers extensive evidence on examining momentum strategy in China (e.g., Cheema et al., 2017; Cheung et al., 2015), and there are also several studies that empirically investigate the market frictions (e.g., Morck et al., 2000; Qian et al., 2017) and equity misvaluation (e.g., D. Liu et al., 2016; Luo et al., 2015) in the Chinese context. However, the relation between momentum premium, market frictions and stock misvaluation has not been examined before in China.…”

Stock Market Integration in China: Evidence from the Asymmetric DCC Model and Copula Approach

“…Chinese stock markets have developed rapidly in the past two decades, leading to increased scholarly attention (Xu 2000;Jin 2015;Luo et al 2015;Sun and Tong 2000). According to data released by the Shanghai and Shenzhen Stock Exchanges (SEs), the total equity market capitalization of the A and B shares of their respective markets was CNY 19.6 trillion (about USD 3.09 trillion) in April 2013.…”