{"title":"Can quantitative investment improve market efficiency?—Evidence from China","authors":"Ruiqing Hu, Wang Xiang, Weinan Zheng, Keyu Zhou","doi":"10.1111/eufm.12485","DOIUrl":null,"url":null,"abstract":"<p>We investigate the impact of quantitative investment on market efficiency in China. We provide an illustrative model to show that quantitative investment enhances market efficiency. Empirically, we conduct both time-series and cross-sectional analysis. Regarding the time series dimension, we construct <i>QuantDegree</i> to measure the level of quantitative investment. We find that the performance of most anomalies decreases as <i>QuantDegree</i> increases. In the cross-sectional dimension, we sort stocks into portfolios based on quant fund holdings and traditional anomalies. We find the anomaly return is lower within the groups with higher quant fund holdings, a result further confirmed by Fama–MacBeth regressions.</p>","PeriodicalId":47815,"journal":{"name":"European Financial Management","volume":"30 5","pages":"2628-2657"},"PeriodicalIF":2.1000,"publicationDate":"2024-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"European Financial Management","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/eufm.12485","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
We investigate the impact of quantitative investment on market efficiency in China. We provide an illustrative model to show that quantitative investment enhances market efficiency. Empirically, we conduct both time-series and cross-sectional analysis. Regarding the time series dimension, we construct QuantDegree to measure the level of quantitative investment. We find that the performance of most anomalies decreases as QuantDegree increases. In the cross-sectional dimension, we sort stocks into portfolios based on quant fund holdings and traditional anomalies. We find the anomaly return is lower within the groups with higher quant fund holdings, a result further confirmed by Fama–MacBeth regressions.
期刊介绍：
European Financial Management publishes the best research from around the world, providing a forum for both academics and practitioners concerned with the financial management of modern corporation and financial institutions. The journal publishes signficant new finance research on timely issues and highlights key trends in Europe in a clear and accessible way, with articles covering international research and practice that have direct or indirect bearing on Europe.
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