Replicating Profitability Anomalies in China

Abstract

This paper replicates 43 major profitability market anomalies proposed in previous academic papers to verify whether these anomalies are significant in China’s A-share stock market. By using single portfolio analysis in 43 profitability anomalies and value-weighted returns of all A-shares from 2000 to 2019, we find that 16 anomalies are significant at the 5% confidence level (the absolute t value ≥ 1.96). When the absolute t value is adjusted to 2.78, only 9 out of 43 anomalies are significant. In addition, in order to avoid overweighting on microcap stocks, the 30% companies with smallest market capitalization are excluded, and an equally-weighted analysis is also used to verify the significance. The results show that only parts of the profitability anomalies in China’s market are significant.