Time/时间：2021/04/16 – 10:00-11:30 am (Beijing Time)
Venue/地点：Room 501, Jiageng Building 2/嘉庚二号楼501教室
Topic/题目: How Well Do Profitability Measures Predict Cross-Sectional Stock Returns in China?
Speaker/报告人：Suyi Liu and Jun (Tony) Ruan
Facilitator/主持人：Dr. Jun (Tony) Ruan
We evaluate the economic and statistical significance and sources of the cross-sectional stock return predictability of profitability, one of the most prominent predictors among a large pool of predictors documented in the accounting and finance literature based on the U.S. market and others. Using a total of 32 profitability measures (including the prominent accounting variable: accruals) from the most comprehensive A-share sample in China and a full range of methodologies, we do not find systematic evidence in support of the return predictability of profitability. In particular, the most heralded profitability measures in the literature such as return on equity, gross profitability, cash flow, and accruals contain at best weak pricing information. These results stand in sharp contrast to the existing findings based on the Chinese stock market that confirm the strong return predictitability of these measures. We relate our results to the main explanations offered in the literature for return anomalies and propose a (very) noisy proxy explanation for the seemingly very different results for the U.S. and Chinese stock markets. The findings in the U.S. market may be attributed to the choice of high signal-to-noise profitability measures whereas those in the Chinese stock market can be attributed to sample selection bias.
About the Speaker/报告人简介：
Suyi Liu is a third-year student in the Master’s program in accounting at the Institute for Financial and Accounting Studies (IFAS) of Xiamen University (XMU). She is under Jun (Tony) Ruan’s supervision and has recently accepted an offer for studying in the Ph.D. program in accounting at McMaster University in Canada. She has a paper in the final review of Accounting Forum.
Jun (Tony) Ruan is Assistant Professor of Finance at the IFAS of XMU. He has published in the Journal of Financial Research and the Journal of Financial Services Research, and has a paper under the fourth-round revision at the Journal of Financial Economics. His research has won awards from high-quality international conferences and also financial supports for twice from the National Natural Science of China.