Does the investment-profitability correlation affect the factor premiums? Evidence from China

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Article number102012
Journal / PublicationPacific Basin Finance Journal
Online published21 Mar 2023
Publication statusPublished - Jun 2023


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.

Research Area(s)

  • Chinese market, Cross-section of stock returns, Investment premium, Profitability premium