CFA Lecture

Risk Premia investing in Emerging Markets

Risk Premia investing in Emerging Markets: A look at China’s A-share market 

Over the past few years, investors have been pouring money into strategies variously labeled as Risk Premia, Smart Beta, Strategic Beta, Enhanced Beta, etc. These strategies, which are essentially systematic in nature, have taken off in a big way in US and Europe, with billions of dollars of inflows from investors and asset owners into these strategies. However, despite the depth and breadth of Emerging Markets, particularly the Chinese A-share market, the adaptation of risk premia strategies are still at a nascent stage for these investment regions.
How should an investor approach risk premia investing in these markets? Does an equity market like mainland China, with its unique characteristics, lend itself well to risk premia strategies? How does the performance of traditional investment styles differ in the Chinese A-share market when compared with the developed world?