The academic paper “Return Predictability: Evidence from the US-China Supply Chain”, co-authored by Associate Professor Rui CHEN, Zhennan GAO, who was an undergraduate of cohort 2012 in the School of Finance and now is a doctoral student of Peking University), and Professor Xueyong ZHANG, has recently been accepted by “Journal of Portfolio Management”, which is an authoritative journal in portfolio management field.

Abstract：In this article the authors present new evidence for the hypothesis that due to investors limited attention, value-relevant information diffuses gradually in financial markets by investigating the return predictability across transnational supply chain. They find that the corresponding trading strategy delivers superior abnormal return. Using a sample of supply chain between Chinese customers and the US suppliers from 2009 to 2015 and corresponding financial and return data, the authors show that Chinese customer return can predict the US supplier future return at firm level. A long-short portfolio strategy based on these findings yields significant abnormal monthly returns of 2.179 % (equal-weighted portfolio) in the Fama-French five-factor model. The authors also employ Fama-MacBeth regression analysis and Propensity Score Matching matched sample analysis, and the conclusions continue to hold.

Key words: Return predictability; Supply chain; Investment strategy