Capital age and the cross-section of Chinese stock returns

Abstract

This paper investigates the impact of capital age on the cross-section of stock returns in the Chinese stock market. Based on portfolio sorting and Fama‑MacBeth regressions, we find a significant premium for stocks with low capital age, with monthly risk‑adjusted returns that are 0.42%-0.49% higher than those of stocks with high capital age. Mechanism analysis shows that capital age affects expected stock returns through its influence on firms’ investment efficiency and their ability to cope with technology shocks. The premium remains statistically significant after controlling for a comprehensive set of common risk factors and is robust across different weighting schemes and sample selection criteria. Our findings confirm that capital age can serve as a reliable incremental predictor of expected returns in the Chinese stock market.