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More Disclosure Can Still Mean More Inefficiency
- Mandatory disclosures do not automatically make China’s market efficient because retail investors drive roughly 80% of A-share volume.
- Most participants neither read the releases nor process them algorithmically, leaving exploitable information gaps.
Keep Your Ear To The Ground In China
- Track Chinese regulatory changes continuously because rules can alter short selling, IPO pricing, listing standards, and daily price limits.
- Maintain local expertise when possible, while using news coverage to monitor changes that may create new signals.
Characteristics Matter More Than Linear Factors
- Return-predicting characteristics need not represent priced risk factors; they can be information about expected earnings that interacts nonlinearly.
- This explains why characteristics, rather than covariances, often drive anomaly returns and why compressing them can reduce predictability.