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Using monthly data from China’s Shanghai Stock Exchange (SSE) A-share market between 2005 and 2012, this article performs an empirical study on the applicability of the three-factor model to China’s stock market. After testing twenty-five size-BE/ME stock portfolios and four stock sector portfolios, we found that the three-factor model, adjusted for the unique features of China’s stock market, generally fits the SSE A-share market well. The results show that size and value premiums are significant in China’s stock market, although there exist modest differences among industrial sectors. In addition, our empirical results are robust to factor sorting and construction methods
