Value, Size, Momentum, Dividend Yield, and Volatility in China’s A-Share Market

With the gradual relaxation of capital controls and internationalization of the RMB, the Chinese A-share market has garnered significant interest from international investors over the past few years, as has factor investing, though risk-premium strategies have been growing in popularity. In this article, the authors study whether there are significant premiums associated with factors (namely value, size, momentum, dividend yield, and volatility) within the MSCI (Morgan Stanley Capital International) China A-shares universe, and whether these factors are significant in explaining the variability of returns. Although they find positive premiums for all factors, only value and dividend yield show significance at the 5% level, and only size and value—when added to the capital asset pricing model—are significant in explaining the variability of returns. TOPICS:Emerging, factors, risk premia, portfolio management/multi-asset allocation