The asset growth anomaly in the Chinese stock market

ABSTRACT

We discuss the existence and derivation of the asset growth anomaly in China’s A-share market. Our findings suggest that there is a negative relationship between the asset growth rate and future returns during 2008 to 2016 in the Chinese stock market. Furthermore, we investigate whether the asset growth anomaly is derived from mispricing or risk premia. Our tests reveal that it is the asset growth rate characteristic that predicts returns, which indicate investors misprice the asset growth rate characteristic and raise doubts regarding the risk explanation.

KEYWORDS:

• Asset growth anomaly
• mispricing
• risk premia

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This article is funded by the National Natural Science Foundation of China (71790594, 71771170, 71871157), the Ministry of Education Fund on Humanities and Social Science (14YJC790029), and the Science and Technology Program of Tianjin (17ZLZXZF00290).