Proceedings of the 2025 5th International Conference on Enterprise Management and Economic Development (ICEMED 2025)

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Mitigating Shell Value Contamination in China’s A-Share Market: A Two-Factor Strategy Combining Size and Earnings-to-Price Effects

Authors
Xinyi He1, *
1Central University of Finance and Economics, Chang Ping, Beijing, China
*Corresponding author. Email: 2022310325@email.cufe.edu.cn
Corresponding Author
Xinyi He
Available Online 14 August 2025.
DOI
10.2991/978-94-6463-811-0_56How to use a DOI?
Keywords
Factor Investing; Size Effect; Value Effect; Chinese A-Share Market; Risk-Adjusted Returns
Abstract

This study investigates the joint explanatory power of size (ME) and value (EP) factors in China’s A-share market from 2000 to 2024. Addressing structural idiosyncrasies such as shell value contamination, we propose a two-factor strategy that excludes the smallest 4% of stocks and constructs portfolios via ME-EP decile sorting. Empirical results show that the EP+ME portfolio generates an annualised return of 4.17% with a Sharpe ratio of 0.17, outperforming single-factor and alternative multifactor models. The strategy demonstrates resilience across market regimes but remains sensitive to macroeconomic shocks, as evidenced by drawdowns during the 2008 crisis and post-2019 geopolitical tensions. Correlation analysis reveals strong alignment with the CSI 500 index (ρ=0.36), highlighting mid-cap exposure as a key driver. Methodological refinements enhance robustness, including dynamic exclusion thresholds and survivorship bias mitigation. These findings contribute to emerging market asset pricing literature and offer practical insights for institutional investors navigating China’s evolving equity landscape.

Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2025 5th International Conference on Enterprise Management and Economic Development (ICEMED 2025)
Series
Advances in Economics, Business and Management Research
Publication Date
14 August 2025
ISBN
978-94-6463-811-0
ISSN
2352-5428
DOI
10.2991/978-94-6463-811-0_56How to use a DOI?
Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Xinyi He
PY  - 2025
DA  - 2025/08/14
TI  - Mitigating Shell Value Contamination in China’s A-Share Market: A Two-Factor Strategy Combining Size and Earnings-to-Price Effects
BT  - Proceedings of the 2025 5th International Conference on Enterprise Management and Economic Development (ICEMED 2025)
PB  - Atlantis Press
SP  - 533
EP  - 543
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-811-0_56
DO  - 10.2991/978-94-6463-811-0_56
ID  - He2025
ER  -