Affiliation:
1. PBC School of Finance Tsinghua University Beijing People's Republic of China
2. School of Finance Renmin University of China Beijing People's Republic of China
3. International School of Economics and Management Capital University of Economics and Business Beijing People's Republic of China
Abstract
AbstractWe 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.