The Capm Model In The Shanghai Stock Market Empirical Research

In this paper, in order to test whether CAPM suits for the capital market of mainlandchina, we did research deeply on the shanghai stock market attempt to find out theway to modify the model to satisfy the usage in our market. Besides the factor of βin CAPM, we added to the model several other factors which supposed may influencethe profit of stocks in certain degree. We fund that in our capital market, there are fivemore factors , namely, earning capability of stockholders, developing capability of thecorporation, long-term and short-term debt repayment capability are quite influencingto the earning ratio.Firstly, we draw dates from 100 stocks in shanghai stock market as the samplesover period 1999 to 2004. We use BJS method to make many regressions and try toanalyses the relationship between return and risk. We fund that the risk premium ofthe stock groups is in direct ratio to the risk premium of the market portfolio when wetry to get the β of the stock groups;but the positive relationship between the groupearning ratio and the risk disappear when we do the research. So our conclusion is thatwhether CAPM is useful in our market depends on the sample we chose.Secondly, this paper chose several other indicators including the situations ofcorporation, stockholders, ownership, and repayment capability and so on to test ifthere exist any other key factors should be included in the model to suit our marketbetter, which we hope can be helpful for other studies.