Quantitative Study On The Effect Of Arbitrage Risk On Stock Mispric Ing In China’s Stock Market

At present, the domestic study of Chinese stock market mispricing mainly focused on the interpretation of the institutional level, at the same time, domestic scholars on the research method is still confined to the research paradigm of capital asset pricing model, and rarely able to break through the mean-variance framework to research pricing problem. From the practical level, quantitative investment is rise in nearly a decade of a new investment ideas and methods, but Chinese stock market has not yet set up an effective mechanism of short during the long time. In evaluating the process of portfolio risk, investors often not consider stock arbitrage opportunities, and ignore the objective existence of the stock risk arbitrage, as a result of it, they might suffered a stock fluctuations in the actual operation process. In this paper, we make econometric analysis between the errors of arbitrage pricing and the risk arbitrage, and give a explanation of Chinese stock market pricing, in order to perfecting the price discovery mechanism of the stock market in our country, developing the function of the stock market the rational allocation of social capital provide important theoretical basis. On a practical level, by given a more real risk measure between the analysis of the pricing errors and risk arbitrage, to help investors found risk, management risk, maximize investment returns better.In this paper, we use Fama-Macbeth regression method, and builds the mispricing of indicators, X1, X2, XI, to inspect the effectiveness. The conclusion shows three measure indexes of mispricing is better than BM index in explanatory power of yielding, and its applicable after subjoin the control variable. Meanwhile, the three indicators of mispricing explanatory power have different in the time dimension. Among them, the X1in explaining short-term hold yields than X2, and X2in explaining the long-term holding period yield is better than the X1; XI is a better combination in two types of indicators, and X1in the short term holding yields and long-term yields has good explanatory power, then deformation。on the above indexes, examine whether there is a significant correlation between risk arbitrage the stock mispricing and the stock mispricing,And add virtual variable to test whether is symmetrical between the correlation in the stock overvalued or undervalued. Conclusion shows that there is a significant correlation between risk arbitrage and the stock mispricing, but this correlation is asymmetric in the stock overvalued and undervalued. When the stock is overvalued, there were significantly positive correlations between the mispricing and arbitrage risk; When the stock is undervalued, there is significant negative correlation between the mispricing and arbitrage risk.There are two main innovations in this article. First, this paper combined with the relative valuation method and residual income model, proposed three new measurement index of stocks mispricing:the X1, X2and XI, and then confirmed the effectiveness of the three indicators in measure stock mispricing. Second, this article ignored the investors’irrationality is a major cause of mispricing occurs, and given a theoretical explanation in risk arbitrage mispriced phenomenon, and has carried on an empirical analysis.