Application Of Capm Based On MSCI China's A-Shares Index Stocks

On June 21,2017,MSCI announced that China's A-shares will be included in the MSCI Emerging Markets Index.It is expected to include 222 China's A-shares stocks;on June 1,2018,A-shares will be officially included in the MSCI index and a total of 234 large-cap stocks was included;as of June 30,2018,finally,the number of constituent stocks was 236.All of these 236 constituent stocks are large-cap stocks,covering nearly 20 industries including financial services,pharmaceutical biology,electronics,real estate,machinery and equipment,food and beverage,agriculture,forestry,animal husbandry,fishery,transportation,etc.The company's work situation is good,the market value of circulation is large and the transaction frequency is high.Thus,the constituent stocks have great advantages in terms of company size,industry representativeness and liquidity.At present,some domestic scholars have studied the applicability of the Capital Asset Pricing Model(CAPM)in China's Shanghai and Shenzhen A-shares,B-shares,and small and medium-sized board markets,the GEM market,and some special stocks,but never studied on the new concept of the application of CAPM model based on the MSCI China's A-Shares Index.Therefore,based on the theory of learning and studying Western asset pricing,we creatively introduce the scientific pricing theory applicable to the special concept component of MSCI China's A-Shares Index,find out the risk factors and pricing mechanisms that affecting China's securities market,provide scientific investment decisions for rational investors and it can bring important theoretical and practical significance for promoting the harmonious and healthy development of China's securities market.Based on the introduction of the theory of capital asset pricing model and the empirical analysis of scholars at home and abroad,this paper focuses on the formula derivation and significance of the CAPM model,and further analyzes the significance of studying the applicability of the CAPM model in the MSCI China's A-shares Index.The author uses the 236 constituent stocks of the MSCI China's A-shares Index as a sample,and selects stock datas from July 1,2013 to June 30,2018 for a total of 5 years,using BJS and FM method for conducting an empirical test.The applicability of the Fama-French three-factor model is then verified using the same sample and different calculation methods.The empirical test results show that the standard CAPM model has a poor fit in the research object.In addition to the market systemic risk,there are other non-systematic risk factors that affect the stock's return rate.The CAPM model is not applicable to the MSCI China's A-Shares Index constituent stocks.However,the combination of market risk factor,market capitalization factor and book value ratio factor has a significant impact on the return rate of stocks.The three-factor model has strong applicability to MSCI China's A-shares Index stocks and has a high explanatory power.