Size and Price-to-Book Effects in Stock Returns: Evidence from Chinese Stock Markets
Type of Degreethesis
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In this thesis, the relationship between stock return, beta, size and P/B ratio in the Chinese stock market is reexamined. Jensen, Johnson, and Mercer’s approach is applied to confirm whether the P/B effect and size effect work in Chinese stock market. Results provide strong evidence showing that the size effect is present. However, no definite evidence is provided for the P/B effect in Chinese markets. This conclusion is inconsistent with previous studies on the Chinese stock market. Furthermore, I find that contrary to the P/B ratio effect and size effect in the U.S. stock market these effects work better in restrictive monetary policy period. I also find that from Shanghai Stock Exchange can better explain the P/B ratio effect and size effect than Shenzhen Stock Exchange.