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Review of Quantitative Finance and Accounting

, Volume 29, Issue 2, pp 181–203 | Cite as

The cross-sectional relationship between stock returns and domestic and global factors in the Chinese A-share market

  • Yuenan Wang
  • Amalia Di Iorio
Original Paper

Abstract

By using an extension of the Fama and MacBeth cross-sectional regression model, this analysis examines the relationship between stock returns and (i) a local beta, (ii) two global betas, and (iii) some firm-specific characteristics in the Chinese A-share market. The results of the analysis suggest that neither the conditional local beta nor the global betas has a significant relationship with stock returns in A-shares. Our findings indicate that firm factors, such as the book-to-market ratio and firm size, are important in explaining stock returns. However, the size effect is sensitive to the specification of the model. Finally, the results of sub-period tests indicate that the A-share market did not become increasingly integrated with either the world stock markets or the Hong Kong stock market over the period 1995–2002.

Keywords

Chinese stock market Market integration GARCH model 

JEL Classifications

G12 G15 

Notes

Acknowledgements

The authors wish to express their gratitude to Robert Brooks for his assistance and support. They would also like to thank an anonymous referee for helpful comments and suggestions.

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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.School of Economics, Finance & MarketingRMIT UniversityMelbourneAustralia

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