Empirical Study On Chinese Stock Market Based On Multi-factor Model

The pricing offinancial assets is not only the focus of theoretical research on finance,but has also been closely watched by investors in capital markets.The factor model is the cornerstone for studying asset pricing and developing investment strategies.To this day,most of the research in China's stock market uses a three-factor model that simply replicates Fama and French(1993).Based on the particularity of China's political and economic environment,how to apply the factor model to domestic capital markets has always been a hot topic for scholars and experts.This paper takes the stock data of a-share listed companies from January 2000 to December 2017 as the sample.Firstly,through the fama-macbeth cross-section regression method,the factors that can best reflect the cross-section change of the average stock return rate in the valuation ratio variables are analyzed and selected,so as to try to construct the CH-3 factor(size,value and market)model with China's national conditions.Then was studied by factor loading and comprehensive test method of GRS CH-3,and FF-5 three factor model in our country the capital market in the ability of expression and explanation for each other,in the end,this paper constructs the cross section of a typical vision of China's stock market portfolio,found that build CH-3 factor model in explaining the Chinese stock market vision ability of analysis and comparison of the outstanding performance.The main conclusions of this paper are as follows:(1)the CH-3 factor model is constructed by the three factors of market,size and value.Among them,since Earnings to Price(EP)is a good alternative to Book to Market(BM),Earnings to Price(EP)is selected to depict the value factor in the CH-3 factor model.(2)when using the three factors in the CH-3 factor model to explain the excess return rate of the FF-3 factor model,it is found that the CH-3 factor model can price the ff-3 factor model.(3)in the subsequent analysis and comparison between the CH-3 model and the ff-5 model,it is concluded that the performance of the CH-3 factor model is better than that of the FF-5 factor model.(4)this paper further studies the interpretation of the CH-3 factor model in Chinese stock market anomalies,and finds that the CH-3 factor model can explain most of the anomalies including value,profit,investment and income reversal,and has a strong explanatory power for the anomalies.