Empirical Study on the Book-to-Market Effect in China Stock Markets

This paper shows that the book-to-market effect is existed in China stock markets by using the data from 1995 to 2008, and we have the ability to use the book-to-market ratio to predict future returns and arbitrage. Through comparing aviation enterprises with the market average level, we also find the book-to-market effect exists in aviation industry. Result shows the semi-strong form Efficient Market Hypothesis is untenable in China stock markets, and investing on value stocks can get abnormal returns.