PT  - JOURNAL ARTICLE
AU  - Wilma de Groot
AU  - Laurens Swinkels
AU  - Weili Zhou
TI  - Practical Applications of China A-Shares: Strategic Allocation to Market and Factor Premiums
AID  - 10.3905/pa.2022.pa504
DP  - 2022 Jul 13
TA  - Practical Applications
PG  - pa.2022.pa504
4099  - https://pm-research.com/content/early/2022/07/12/pa.2022.pa504.short
4100  - https://pm-research.com/content/early/2022/07/12/pa.2022.pa504.full
AB  - In China A-Shares: Strategic Allocation to Market and Factor Premiums, from the Non-US Financial Markets 2021 issue of The Journal of Portfolio Management, authors Wilma de Groot, Laurens Swinkels, and Weili Zhou (all of Robeco) analyzed the potential benefits of adding China A-shares to a portfolio of developed-market assets. China A-shares recently have become available to non-Chinese investors, and major emerging-market indexes have started to include them in small amounts. This study sought to determine how adding China A-shares affects the risk-adjusted returns of a developed-market portfolio and whether factor investing with China A-shares is profitable, net of transaction costs.The results showed that reallocating small portions of assets to China A-shares increases risk-adjusted returns more than reallocating to non-China emerging-market shares alone. China A-shares show much lower correlation with returns of developed-market stocks than shares from other emerging markets do, and they add more value when developed markets are in a bear market. Therefore, adding China A-shares can effectively diversify a portfolio. Factor investing with China A-shares produces higher risk-adjusted returns than passive investing, and this premium persists net of transaction costs.