The style and innate structure of the stock markets in China

By applying symbolic principal component analysis (SPCA) to 10 years (1996-2005) of interquartile data, we find that two factors--corporate style and corporate performance--parsimoniously characterize the innate structure of the Chinese stock markets. Further analysis shows that the seemingly peculiar negative beta/return relation is not truly anomalous but is associated to using a very high risk-free rate, pervasive negative returns, and stock styles. The negative returns in recent years coincided with the bearish stock market, which started in mid-2001. Time-indexed zoom-star plots also confirm a trend of high speculation on growth stocks in recent years.