An empirical cross-section analysis of stock returns on the Chinese A-share stock market

Abstract

This study applied the Fama-French three-factor model (1993) and CAPM to examine A-shares in Chinese equity market from 1996 to 2005. The authors find a positive relation between book-to-market ratio and stock excess returns, and negative between size and stock excess returns. The results demonstrate that the Fama-French three-factor is more accurate in predicting stock returns than the CAPM. The size effect is stronger than that of the book-to-market ratio (BTM). The results also suggest that stock profitability is related to size and BTM ratio in China's stock market.