Size, Book/Market Ratio and Risk Factor Returns

Résumé du livre

This study investigates the risk factors for A-shares listed on both Shenzhen and Shanghai Stock Exchange in China using variables from Akgun and Gibson (2001). By rearranging these risk variables into several principle components, we have run the cross-sectional regression on the orthogonal components. The results produced strong evidence that size and BM ratio could be well explained by these alternative risk variables. Additionally, the variables are better at explaining returns in terms of adjusted R-squares. As such the size and BM effects could be replaced with the risk factors identified that could enable enhanced pricing of risk for investors as well as greater control of the risk factors management.