Advances in Economics, Management and Political Sciences

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Proceedings of the 3rd International Conference on Business and Policy Studies

Series Vol. 67 , 05 January 2024


Open Access | Article

The Application of the Capital Asset Pricing Model (CAPM) in China's Financial Market: An Analysis of Regulatory Impact and International Comparison

Zixuan Tang * 1
1 NYU College of Arts & Science,New York University

* Author to whom correspondence should be addressed.

Advances in Economics, Management and Political Sciences, Vol. 67, 12-17
Published 05 January 2024. © 05 January 2024 The Author(s). Published by EWA Publishing
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.
Citation Zixuan Tang. The Application of the Capital Asset Pricing Model (CAPM) in China's Financial Market: An Analysis of Regulatory Impact and International Comparison. AEMPS (2024) Vol. 67: 12-17. DOI: 10.54254/2754-1169/67/20241253.

Abstract

As the world's second largest economy, China is also one of the world's biggest emerging economies. The Capital Asset Pricing Model (CAPM) is one of the most classic pricing models, and China's asset pricing model has gained a lot of experience from it. This research investigates the application of the CAPM in China's financial market, focusing on the influence of financial market regulation and conducting a comparative analysis with international markets. CAPM is a fundamental asset pricing model used to estimate asset expected returns and risks based on their covariance with the overall market portfolio. The study aims to analyze the practical implementation of CAPM in China's financial market, considering the impact of financial market regulation on the model's effectiveness. Key variables such as market data, risk-free rates, and stock returns are utilized, with specific adjustments made to accommodate China's unique regulatory environment. The research's significance lies in providing valuable insights into asset pricing and risk assessment in China's financial market, as well as implications for investors and policymakers. By comparing the results with international markets, this study contributes to a broader understanding of the CAPM model's applicability and effectiveness in diverse regulatory settings.

Keywords

Capital Asset Pricing Model (CAPM), financial market regulation, China's financial market, international markets

References

1. Sharpe, W. F. (1964). "Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk." The Journal of Finance, 19(3), 425-442. DOI: 10.2307/2977928.

2. Fama, E. F., & French, K. R. (1992). "The Cross-Section of Expected Stock Returns." The Journal of Finance, 47(2), 427-465. DOI: 10.2307/2329112.

3. Wang, J., Chen, M., & Chen, T. (2013). “Evolutionary Game Analysis of Financial Market Regulation in China.” Journal of Beijing Institute of Technology (Social Science Edition), 15(5), 63-66. DOI: 10.15918/j.jbitss1009-3370.2013.05.00.

4. Cui Xiaoqing. (2011)”A Study of Legal and Regulatory Framework for Rural Financial Market Supervision in China.”

5. Sun Yanrun. (2017)”Current Status and Analysis of Financial Market Regulation in China”, Modern Business Trade Industry, 57(4), 127-128. DOI: 10.19311/j. cnki. 1672-3198. 2017.04.057

6. White, A. B., & Black, C. M. (2019). Regulatory Approaches in Western Financial Markets. Journal of Finance Regulation, 15(2), 45-62

7. Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3-56.

8. Jin, Y., & Liu, L. (2001). Empirical Study of CAPM in the Chinese Stock Market. Financial Research, 7, 106-115. doi: CNKI:SUN:JRYJ.0.2001-07-013

9. He Xiaoxing, Yu Hongkai. Empirical Study on the Performance of China's Securities Investment Funds under the Conditional CAPM Framework. Nankai Economic Research, 2003(06): 68-71.

10. Luo Dengyue, Wang Chunfeng, Fang Zhenming. Empirical Study on Time-Varying Beta and Conditional CAPM in Shenzhen Stock Market. Journal of Industrial Engineering and Engineering Management, 2007(04): 102-109.

Data Availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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Volume Title
Proceedings of the 3rd International Conference on Business and Policy Studies
ISBN (Print)
978-1-83558-265-7
ISBN (Online)
978-1-83558-266-4
Published Date
05 January 2024
Series
Advances in Economics, Management and Political Sciences
ISSN (Print)
2754-1169
ISSN (Online)
2754-1177
DOI
10.54254/2754-1169/67/20241253
Copyright
05 January 2024
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

Copyright © 2023 EWA Publishing. Unless Otherwise Stated