This research reveals a significant negative correlation of asset growth rates with stock returns in China's A-share market, suggesting mispricing due to retail investor dominance.
Against the backdrop of China's A-share market transitioning from an emerging to a more mature stage over the past decade, characterized by increasing institutional participation yet persistent retail investor dominance, understanding market anomalies remains critical for both academic research and investment practice. Asset growth anomaly, a well-documented phenomenon in global markets where high asset growth firms underperform their low-growth counterparts, has garnered limited systematic scrutiny in Chinas unique institutional setting. This paper fills the gap by utilizing Fama-MacBeth cross-sectional regression on a decade of listed company data to examine the anomalys existence and drivers. Findings reveal a significant negative correlation between asset growth rates and future stock returns during the period, with mispricing identified as the root causeevidenced by return reversals around earnings announcements and stronger anomaly effects in high idiosyncratic volatility portfolios.
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Shiyue Su (2025) studied this question.
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