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The style and innate structure of the stock markets in China

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  • Long, Wen
  • Mok, Henry M.K.
  • Hu, Yan
  • Wang, Huiwen

Abstract

By applying symbolic principal component analysis (SPCA) to 10Â years (1996-2005) of interquartile data, we find that two factors--corporate style and corporate performance--parsimoniously characterize the innate structure of the Chinese stock markets. Further analysis shows that the seemingly peculiar negative beta/return relation is not truly anomalous but is associated to using a very high risk-free rate, pervasive negative returns, and stock styles. The negative returns in recent years coincided with the bearish stock market, which started in mid-2001. Time-indexed zoom-star plots also confirm a trend of high speculation on growth stocks in recent years.

Suggested Citation

  • Long, Wen & Mok, Henry M.K. & Hu, Yan & Wang, Huiwen, 2009. "The style and innate structure of the stock markets in China," Pacific-Basin Finance Journal, Elsevier, vol. 17(2), pages 224-242, April.
    • Handle: RePEc:eee:pacfin:v:17:y:2009:i:2:p:224-242
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    Cited by:

    1. Mishra, Anil V. & Ratti, Ronald A., 2011. "Governance, monitoring and foreign investment in Chinese companies," Emerging Markets Review, Elsevier, vol. 12(2), pages 171-188, June.

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