We examine the value versus growth investing in the Chinese stock market during 1996-2004.Prior literature has documented that value investing outperform growth investing in sophisticated markets.But little is known about emerging markets.We examine the monthly returns of portfolios classified by value indicators as well as governance indicators.We find that value premium does exist,although not in a clear pattern as in mature markets.We also find that corporate governance indicators do have explanatory power for stock returns.Our findings suggest that in China,high level of state-ownde shares in large companies does not necessarily associate with poor performance as it does in small-and medium-sized companies.We infer that such a corporate governance indicator might proxy for a certain monopoly power (either in resources or markets),which offsets some negative effects of poor governance on the stock returns.
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