Research On The Factors Of Risk Pricing Of Local Government Bonds In Chin

The marketization level of the issuance of local government bonds continues to rise.The pricing mechanism of local government bonds has changed from the negotiation between institutional investors and local governments to the marketization mechanism of risk pricing.Exploring the factors that affect the risk pricing of local government bonds is a key issue that helps to improve the pricing efficiency of local government bonds.The research on the pricing of local government bonds in China has a short start,and now it mainly focuses on the pricing of local government bonds,the issue of credit spreads and the issue of marketization,while the research on the pricing of local government bonds in the secondary market is very little.Therefore,based on the data of the secondary market,this paper conducts empirical research on the factors affecting the risk pricing of local government bonds,and explores a more effective pricing model for the pricing of local government bonds.On the one hand,it can make up for the deficiencies of the current research on the content and research methods of local government bonds,on the other hand,it can provide reference for the marketization of local government bonds and investors’ investment decisions,which has far-reaching significance in theory and practice.This paper takes the cross-sectional yield of local government bonds and urban investment bonds listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange of China from 2017 to2020 as the research object,explores the risk factors of effective pricing of local government bonds in China,and then,with reference to the Fama-French factor model,establishes a more accurate risk factor pricing model than the traditional market factor model for pricing local government bonds in China.First of all,it analyzes the risk factors that affect the cross-sectional yield of local government bonds,and on this basis,it carries out an empirical analysis of the portfolio based on single variable sequencing to explore the pricing effect of risk factors such as volatility risk,bond value,local government credit risk and the economic conditions of the issuers on the yield of local government bonds;Secondly,the control variables are added to carry out the bivariate ranking portfolio empirical study to verify whether the pricing ability of the above factors on the yield of local government bonds can be explained by the characteristic factors of bonds;In addition,this paper takes the volatility risk of t month,bond value,local government credit risk and the economic status of the issuers as independent variables,and uses the yield of local government bonds t+1 month as dependent variables to conduct Fama-Macbeth cross section regression,and again verifies the pricing effect of these risk pricing factors on the yield of local government bonds;Finally,based on the above empirical results,this paper establishes a factor model to explore the effectiveness of the pricing of the factor model established in this paper.The empirical results show that: first,volatility risk,bond value,local government credit risk,and the economic status of the issuers are all risk factors for the pricing of local government bonds;Secondly,under the control of the characteristic variables of bonds,the pricing effect is still unchanged,and the characteristic variables of bonds cannot explain the risk factors proposed in this paper;Thirdly,the empirical results of Fama-Macbeth cross section regression show that the risk pricing model constructed in this paper can effectively explain the yield of local government bonds;Fourth,compared with traditional market factor models such as Fama-French three-factor model,Fama-French five-factor model and Carhart four-factor model,the risk factor pricing model constructed by using market risk factors,volatility risk factors,value factors,credit risk factors,economic conditions of issuers and other market risk characteristics of local government bonds in China is more efficient in pricing local government bonds.Finally,based on the research conclusions and the development process of the marketization of local government bonds in China,this paper puts forward relevant suggestions for the improvement of the local government bond market,the improvement of the pricing efficiency of local government bonds and the investment needs of investors.