# Size and value in China

“Size and value in China” (2019), by Jianan Liu et al. Economics research paper. Original abstract below, unchanged. No free PDF was found.

- Authors: Jianan Liu, Robert F. Stambaugh, Yu Yuan
- Published: March 15, 2019
- Field: Economics
- DOI: https://doi.org/10.1016/j.jfineco.2019.03.008
- Source: https://doi.org/10.1016/j.jfineco.2019.03.008

## Abstract

We construct size and value factors in China. The size factor excludes the smallest 30% of firms, which are companies valued significantly as potential shells in reverse mergers that circumvent tight IPO constraints. The value factor is based on the earnings-price ratio, which subsumes the book-to-market ratio in capturing all Chinese value effects. Our three-factor model strongly dominates a model formed by just replicating the Fama and French (1993) procedure in China. Unlike that model, which leaves a 17% annual alpha on the earnings-price factor, our model explains most reported Chinese anomalies, including profitability and volatility anomalies.

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