Advances in Economics, Management and Political Sciences
- The Open Access Proceedings Series for Conferences
Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
Series Vol. 56 , 01 December 2023
Open
Access | Article
An Analysis of the Applicability of Pricing Models in the Chinese Stock Market
* Author to whom correspondence should be addressed.
Abstract
The stock market in China has an important position in the world, but it has not been able to find a pricing model suitable for the market. This paper reviews the history and development of various pricing models, analyzes relevant research on their application in the Chinese stock market, and discusses the applicability of various pricing models. It is found that the applicability of the capital asset pricing model (CAPM) in China is low; the applicability of the Fama-French three-factor model and the Fama-French five-factor model is better than CAPM, but there is significant controversy over the advantages and disadvantages of the two. It is also found that the applicability of the five-factor model may have regional differences in different markets, and there may be differences in redundant factors in different markets. It is proposed that future research should obtain more accurate market data, explore new influencing factors, and build a pricing model more suitable for the stock market in China by combining the characteristics based on more advanced data analysis technology.
Keywords
CAPM, three-factor model, five-factor model, Chinese stock market
References
1. Markowitz HM. Portfolio selection. The Journal of Finance, 1952, 7(1), 77.
2. Sharpe WF. CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*. Journal of Finance, 1964, 19(3), 425–442.
3. Fama EF, French KR. Common risk factors in the returns on stocks and bonds [J]. Journal of Financial Economics, 1993, 33(93): 3~56.
4. Fama EF, French KR. Dissecting Anomalies with a Five-Factor Model, Review of Financial Studies, 2016, Vol. 29(1):69-103.
5. Ross, SA. “The Arbitrage Theory of Capital Asset Pricing.” Journal of Economic Theory, vol. 13, no. 3, 1976, pp. 341–360.
6. Fama EF, French KR. The Cross‐ Section of Expected Stock Returns. Journal of Finance, 1992, 47(2), 427–465.
7. Carhart Market M. On Persistence in Mutual Fund Performance [J]. The Journal of Finance, 1997, 52(1):57-82.
8. Donghui Shi. Empirical study on risk of Shanghai stock market [J]. Economic Research, 1996(10):44-48.
9. Gang Sun. Empirical Study on Capital Asset Pricing Models in the Chinese Stock Market [J]. Journal of Statistics and Information, 2003 (05): 91-94
10. Xingwang Huang, Sixiu Hu, Jun Guo. Two-factor model of Chinese stock market [J]. Contemporary economic science, 2002(05):50-57+95.
11. Xin Yang, Zhanhui Chen. An empirical study of three-factor asset pricing model in Chinese stock market [J]. Quantitative economy and technical economy research, 2003(12):137-141.
12. Yuanyuan Liu. Empirical research on the efficiency of Chinese stock market: based on Fama-French three-factor model [D]. Southwestern University of Finance and Economics, 2012:1-65.
13. Lihui, Guanying Wang, Wei zhang. Three-factor model Pricing: How China is different from the United States [J]. Global Finance. 2014(7):37-45.
14. Shengmin Zhao, Honglei Yan, Kai Zhang. Is the Fama- French five-factor model better than the three-factor model — from the Chinese A-share market. Empirical evidence. Nankai Economic Research, 2016(2): 41 - 59 .
15. Lanlan Liu, Shujie Yao. Empirical analysis of asset growth effect and market efficiency based on risk factors [J]. Journal of Chongqing University (Social Science Edition), 2016(5):34-42.
16. Zhibing Li, Guangyi Yang, Yongchang Feng, Liang Jing. An empirical test of the ama-French five-factor model in the Chinese stock market [J]. Financial research, 2017(6):191-206.
17. Bin Guo, Wei Zhang, Yongjie Zhang, Han Zhang. The Five-Factor Asset Pricing Model Tests for the Chinese Stock Market [J]. Pacific-Basin Finance Journal, 2017, 43:84-106.
18. Yimeng Ma. An Empirical Study of Fama-French Five-Factor Model in Valuation of Internet Listed Firms [D]. Capital University of Economics and Business, 2018: 1-45.
19. Hongbing Ouyang, Jingqiong Yu. Research on the Effect of Liquidity on the Asset Pricing Based on the Factor Model [J]. Journal of Financial Development Research, 2020, (07):13-22.
Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Authors who publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open Access Instruction).
- Volume Title
- Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
- ISBN (Print)
- 978-1-83558-159-9
- ISBN (Online)
- 978-1-83558-160-5
- Published Date
- 01 December 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/56/20231077
- Copyright
- 01 December 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited