Download PDFOpen PDF in browserDoes the Factors Model Perform Well in Emerging Market? - the Empirical Evidence of China Stock Market.EasyChair Preprint 191015 pages•Date: November 9, 2019AbstractThe most famous asset pricing models, Fama and French 3factor(1992, 1993, 1996) and 5 factor(2015) model, in the past few decades were applied in many countries. The U.S. (developed financial markets) country-specific additional 2 factors in the 5-factor model, RMW and CMA or profitability premium and investment premium, empirically cannot further capture the return variation of classic 3 factors/chrematistics in China (developing financial markets ) stock market. Therefore, the classic 3-factor has better performance than the 5-factor model in China. We do not presume that firms in different countries share same features. Following the Liu, Stambaugh and Yuan(2019), we replace the book-to-market ratio to earning-to-price ratio(EP ratio). By using Shanghai and Shenzhen exchange stocks, we find out the redundancy of HML only in the 5-factor model. In the Fama MacBeth regression, the SMB and HML are significant factors in three factor model for explaining the China return variation. Keyphrases: Anomalies, China, Investment, Profitability, Three and Five factors, size, value
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