The Book-to-Market Anomaly in the Chinese Stock Markets

Abstract

This paper examines the existence of value premium in the Chinese stock markets and empirically provides its explanation. Our results suggest that the value premium does exist in the Chinese markets, and investor sophistication is significant in explaining its existence. In particular, there is supporting evidence that the value premium could be driven by individual investors, whereas stocks that are mostly held by institutional investors are value-premium free. We briefly discuss the implications of our findings.

Keywords

• Book-to-Market Anomaly
• Chinese Stock Markets
• Empirical Asset Pricing
• Value Premium
• Investor Sophistication