TY - JOUR
T1 - Does the investment-profitability correlation affect the factor premiums? Evidence from China
AU - Chen, Shan
AU - Liu, Xujun
AU - Li, Tao
PY - 2023/6
Y1 - 2023/6
N2 - We investigate whether the investment-profitability correlation affects the investment and profitability premiums in the U.S. and Chinese markets. By replicating the results of Kilic, Yang and Zhang (2022), we confirm that the factor premiums are lower when the investment-profitability correlation is high in both markets. However, unlike the U.S. market, mitigating the correlation effect does not resurrect the insignificant investment premium in China. In contrast, the profitability factor earns robust returns under different specifications. © 2023 Elsevier B.V.
AB - We investigate whether the investment-profitability correlation affects the investment and profitability premiums in the U.S. and Chinese markets. By replicating the results of Kilic, Yang and Zhang (2022), we confirm that the factor premiums are lower when the investment-profitability correlation is high in both markets. However, unlike the U.S. market, mitigating the correlation effect does not resurrect the insignificant investment premium in China. In contrast, the profitability factor earns robust returns under different specifications. © 2023 Elsevier B.V.
KW - Chinese market
KW - Cross-section of stock returns
KW - Investment premium
KW - Profitability premium
UR - http://www.scopus.com/inward/record.url?scp=85151417537&partnerID=8YFLogxK
UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-85151417537&origin=recordpage
U2 - 10.1016/j.pacfin.2023.102012
DO - 10.1016/j.pacfin.2023.102012
M3 - RGC 21 - Publication in refereed journal
SN - 0927-538X
VL - 79
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
M1 - 102012
ER -