Empirical Research About Asset Pricing Model Based On The Proportion Of Tradable Shares Effect

The asset pricing problem has been the priority research area of Modern Finance. There havebeen many asset pricing model in the course of resaech,any asset pricing model tries to findout the different factors that affect the return on assets. A listed company’s shares includetradable shares and non-tradable shares in the Chinese stock market,this is a big differencecompared with the stock markets of the developed Western countries. Considering thisunique feature may be have some impact on asset pricing problem in the Chinese stockmarket,therefore, this paper does some empirical research on the related aspects based on thesample figure of A shares in Shanghai Stock Exchange from July2006to June2010.Firstly,this paper uses the portfolio grouping method and FM cross-sectional regressionmethod to test the existence and significance about the proportion of tradable shareseffect.The result shows that the proportion of tradable shares effect exists in ShanghaiA-share market during the sample period,and this effect is significant. The proportion oftradable shares has a significant and positive influence on stock returns. When using the FMcross-sectional regression method to study the proportion of tradable shares effect,this paperselect size and book-to-market as control variables.The study found that the size effect andbook-to-market effect exist in Shanghai A-share stock market,and the size effect is notsignificant,the book-to-market effect is significant.Next,this paper improves on the FFthree-factor asset pricing model,and establishes four-factor asset pricing model whichincludes market factor,size factor,book-to-market factor and proportion of tradable sharesfactor. Through the empirical research，we can find that four-factor asset pricing model has astrong explanatory power on stock returns.Finally, this paper makes a comparative analysisof four-factor model,capital asset pricing model and FF three-factor model,the result showsthat four-factor model has more explanatory power. Therefore, the four-factor model is moresuitable for the Chinese stock market.