Based on the expected utility under uncertain probability distribution, we explore whether the ambiguity of individual stocks is priced in China’s A-share market and the mechanism behind the ambiguity premium phenomenon. Theoretically, when the asset price is in a specific price range, investors with ambiguity aversion do not participate in the transaction of the asset. As the ambiguity of assets increases, investors with high ambiguity aversion withdraw from the market, and investors with low ambiguity aversion remain in the market (the limited market participation phenomenon); investors who remain in the market due to lower ambiguity aversion are also willing to accept a low ambiguity premium. Empirically, we use "the volatility of the distributions of daily stock returns within a month" to measure monthly ambiguity; and find that (1) the equal-weighted average returns of the most ambiguous portfolios (top 20%) are significantly lower 1.38% than those of the least ambiguous portfolios (bottom 20%); (2) ambiguity still significantly negatively affects the cross-sectional stock return after controlling for common firm characteristics; (3) the higher the ambiguity, the lower the future trading activity, the empirical results are consistent to the theoretical predictions. Those findings reveal the mechanism of the negative ambiguity premium in the A-share market, provide new ideas for further building a factor pricing model suitable for the A-share market, and provide a fresh perspective for preventing systemic financial risk.

This paper employs a difference-in-differences approach to study whether a Chinese audit firm improves its competencies through organizational learning after one of its audit teams has a client cross-listed in the US. Among a group of companies that are only listed in China, we define those audited by Chinese audit firms that are not international Big 4 affiliates and have cross-listed clients as the treatment group, and companies audited by other audit firms as the control group. We find an improvement in audit quality for the treatment group after their audit firms have cross-listed client experience in the US, and this improvement is not attributable to the effect of joining an international accounting firm network, registration with the PCAOB, or the consolidation in the audit market. A survey of auditors corroborates these findings and provides evidence on audit firms’ specific actions to facilitate learning. Our findings shed light on the benefits of auditing cross-listed clients in the US and its positive externality on improving the audit quality of non-US-listed companies in China.

We develop novel high-frequency indices that measure climate attention, covering a wide range of both developed and emerging economies. This is achieved by analyzing the text of over 23 million tweets published by leading national newspapers on Twitter during the period from 2014 to 2022. Our findings reveal that a country experiencing more severe climate news shocks tends to see both an inflow of capital and an appreciation of its currency. In addition, brown stocks in highly exposed countries experience large and persistent negative returns after a global climate news shock. These outcomes align with the predictions of a risk-sharing model in which investors price climate news shocks and trade consumption and investment goods in global markets

Using a comprehensive factor zoo, we document a notable factor MAX premium in the Chinese market. Factors with high maximum daily returns consistently outperform those with low maximum returns by 0.82% per month in the future, on a risk-adjusted basis. This premium remains robust controlling for various factor characteristics, and is not sensitive to the selection of factors. The factor MAX anomaly stands apart from lottery-type stock anomalies and contributes to elucidate most of these anomalies. The factor MAX premium concentrates in high-eigenvalue principal component factors, shedding light on the prevalent lottery preferences for factor investing in China’s A-share market. We document pronounced existence of factor MAX anomaly in the United States and other G7 countries.

This paper focuses on how Chinese and global economic policy uncertainties (CNEPU and GEPU) and geopolitical risks (CNGPR and GGPR) affect the growth of inbound tourism in China using ARDL and NARDL models as well as monthly series of Chinese inbound tourism revenue and arrivals. Firstly, we find significant effects of CNGPR and GGPR as well as GEPU on the growth of inbound tourism in Hainan Province and even in China nationwide, while the impact of CNEPU is limited. Among them, GEPU always has a significant long-term negative impact on inbound tourism growth (both inbound tourism revenue and inbound tourism arrivals). However, CNGPR has a significant short-term negative impact on inbound tourism growth in China nationwide but it has a significant long-term negative impact on inbound tourism growth in Hainan Province. Besides, estimation results of NARDL model further show the significant short-term effects of GEPU and GGPR on the growth of inbound tourism arrivals in Hainan Province and even in China nationwide, and such short-term effects are always significantly asymmetric. Among them, the negative components of GGPR can always more influence the growth of inbound tourism arrivals. However, the positive components of GEPU can more influence the growth inbound tourism arrivals in Hainan Province, but the negative components of GEPU can more influence the growth of inbound tourism arrivals in China nationwide.

We document a positive investment premium in the Chinese market, in contrast to the typical negative investment premium in other markets. The premium only exists when we measure investment by quarterly asset growth, not annual asset growth. A positive premium can be attributed to the fact that quarterly asset growth positively predicts future profitability and GDP growth in the Chinese market, whereas both relationships are negative in the U.S. market. Furthermore, Chinese firms have shorter operating cycles compared to those in the U.S., which explains why quarter data is more valuable.

Despite nearly twenty years of privatization, mixed-ownership reform has been the mainstay of SOE reform in China in recent years. This raises the question of whether the financial performance of mixed-ownership firms (Mixed firms) is better than private-owned enterprises (POEs). Although Mixed firms suffer more from government intervention, unclear property rights, and interest conflicts between state shareholders and private shareholders, they can also benefit from the external resources controlled by the state. Therefore, the performance of Mixed firms is still unclear. Collecting data from the Chinese A-share listed market, we divide the firms into POEs, Mixed firms controlled by the state (MixedSOEs), and Mixed firms controlled by the private sectors (MixedPOEs). Measuring profitability using ROA and ROE, we find that on average, POEs perform better than Mixed firms, and MixedPOEs have a higher profitability than MixedSOEs. Within Mixed firms, more state shares are related to lower profitability, and more private shares are related to higher profitability. Using the NBS survey data, we further find that on average, SOEs exhibit the lowest profitability, with MixedSOEs and MixedPOEs in the middle, and POEs have the highest profitability. We try to address the endogeneity challenge in several ways and get similar results. Overall, our analysis provides new evidence on the financial performance of mixed-ownership firms.

Using a proprietary granular database of a major Chinese stock exchange, we examine heterogenous investors’ trading dynamics around one of the most important macro announcements of the Chinese central bank, the monthly release of monetary aggregates data. Exploiting the trading heterogeneity across assets and across investor types, we find that before announcements, institutional investors reduce their aggregate stock exposure while over-weighing riskier stocks of smaller caps, whereas retail investors provide liquidity by increasing their aggregate stock exposure and avoiding the riskier stocks. Large retail and institutional investors become more informed before announcements and trade in correct directions consistent with the news surprises after announcements, while smaller retail investors trade in opposite directions. While the institutional investors accumulate positive returns with risk compensated, the market realizes sizable pre-announcement equity premium.

This paper studies the evolution of China's production and trade patterns during its integration into the global economy. We document and explain new facts concerning changes in production and exports at the industry and firm levels using microdata and a quantitative Ricardian and Heckscher–Ohlin model with heterogeneous firms. Counterfactual simulations reveal that capital deepening made China's production and exports more capital-intensive, although labor-biased productivity growth acted as a counterforce. Consistent with the data, our model demonstrates that China's trade openness peaked around the mid-2000s and fell until the 2020s, while the world's exposure to Chinese exports rose continuously.

This paper examines the fiscal motives behind municipal governments' decisions to allocate commercial and residential land when two categories of land use are subject to different fiscal revenue alternatives: business-related tax and/or land rent. We use urban parcel-level land transfers during China’s peak period of urbanization, match commercial parcels with residential parcels, and find significant price discounts on commercial parcels relative to adjacent residential parcels. The observed discounts arise from the future tax flows from commercial use, i.e., expected taxes from developed commercial land reduce its transfer price. We conduct a structural estimation to examine the implications on land use structure of future taxes lowering land transfer prices. Results show that while prospective taxes increase commercial land supply, a significant portion of the favorable treatment impact is mitigated by market price responses, suggesting that the land market counters commercial land favoritism when local revenues include both business-related taxes and land value-based charges. The results have implications for the design of urban public revenue systems.