Abstract
We propose a novel trend factor for the Chinese stock market that incorporates both price and volume information to capture dominant individual trading, momentum, and liquidity. We find that volume plays a more significant role in the trend factor for China than for the United States, reflecting the greater retail participation in China. By incorporating this trend factor into the 3-factor model of Liu et al. (2019), we propose a 4-factor model that explains a wide range of stylized facts and 60 representative anomalies. Our study highlights the important role of individual trading in asset pricing, especially in China. (JEL G12, G14, G15)
© The Author(s) 2024. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: [email protected]
2024
This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/pages/standard-publication-reuse-rights)