The Functionality of Book-to-Market Ratio in Chinese Markets

Authors

  • Larry Li Author
  • Adela McMurray Author
  • Bo Liu Author

Abstract

We investigate the question whether the book to market ratio acts as a “risk-based” or “mispricing-based” proxy for share price formation in Chinese markets. We find that a strong relationship is observed between the firms’ book to market ratio and stock returns both in current and following years, while we cannot find a steady relationship between market leverage ratio and stock returns. In addition, the findings support the notion that a mispricing-based explanation is more plausible in China due to the speculative features of the Chinese markets.

Author Biographies

  • Larry Li
    NULL
  • Adela McMurray
    NULL
  • Bo Liu
    NULL

Published

2018-11-29

Section

Articles

License

© Journal of Education and Development. The copyright for all articles published in this journal is retained by the authors. All articles are published under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0). This license permits use, distribution, and reproduction in any medium, whether commercial or non-commercial, provided the original work is properly cited.

How to Cite

The Functionality of Book-to-Market Ratio in Chinese Markets. (2018). Journal of Education and Development. https://journal.chapjulypress.org/index.php/jed/article/view/1220