The Empirical Test of the Fama–French Three-Factor Model in the Chinese Stock Market

Abstract

This paper examines the applicability of the Fama–French (1993) three-factor model in China’s A-share market. Using monthly data from September 1999 to June 2022, we estimate time-series regressions of excess returns on six representative Chinese A-share stocks on the market factor, the size factor, and the value factor. The evidence shows that the market factor is highly significant for all six stocks, the size factor is significantly positive for four of them, while the value factor is not statistically significant in any case. All estimated intercepts (alphas) are large and negative. These results suggest that the Fama–French three-factor structure captures important market and size-related components of risk in the Chinese stock market but does not fully reconcile realised returns with model-implied expected returns.