Academic Director of MCS Program Published a Paper on the Journal of Financial Economics

12/14/2021

The Academic Director of MCS Program, ZHOU Wenyu,  recently published a paper as corresponding author on the Journal of Financial Economics.


Machine Learning in the Chinese stock market

Markus Leippold, Qian Wang, Wenyu Zhou,

Journal of Financial Economics, 2021,

ISSN 0304-405X,

https://doi.org/10.1016/j.jfineco.2021.08.017.

(https://www.sciencedirect.com/science/article/pii/S0304405X21003743)

Abstract: We add to the emerging literature on empirical asset pricing in the Chinese stock market by building and analyzing a comprehensive set of return prediction factors using various machine learning algorithms. Contrasting previous studies for the US market, liquidity emerges as the most important predictor, leading us to closely examine the impact of transaction costs. The retail investors’ dominating presence positively affects short-term predictability, particularly for small stocks. Another feature that distinguishes the Chinese market from the US market is the high predictability of large stocks and state-owned enterprises over longer horizons. The out-of-sample performance remains economically significant after transaction costs.

Keywords: Chinese stock market; Factor investing; Machine learning; Model selection

ZHOU Wenyu

Dr. Wenyu Zhou is currently an assistant professor of economics at International Business School, Zhejiang University. He received his Ph.D. in Economics from University of California, Los Angeles (UCLA) in 2020. Before that, he earned a M.S. degree in Statistics and a M.A. degree in Economics from UCLA in 2019 and 2017. He completed undergraduate studies at Guanghua School of Management, Peking University and received a B.A. degree in Finance and a B.S. degree in Applied Mathematics in 2015. His research interests include theoretical econometrics, empirical asset pricing, and digital economics. His paper has been published in Journal of Financial Economics, Economics Letters. He has also served as a referee for several leading economics journals, such as Journal of Econometrics, Econometric Theory and Economics Letters.