An Empirical Analysis On Electronic Stock Systematic Risk (β) Across-Strait

Stock market is like an economic window of each country. Since the 80's international stock market investors gradually aimed at vigorously developing Asian stock markets. The "China fad" overwhelmed the international investing market. China, Hong Kong and Taiwan have been included as "The Grand Chinese Economic Circle". From 1993, owing to China authority began the macro-control of its economic condition; a newly economic development revived its prosperity. From the point of view of Taiwan investors, the enormous marketing potential enhanced with Taiwan government's "Proactive liberalization with effective management" policy made the China stock market the most popular investing point. Impressively, the QFII (Qualified Foreign Institutional Investor) had been introduced into Mainland China on the 1st of December 2002. The authority allowed foreign capital to buy in stock A. Undoubtedly, it effectively stabilized the continuity and extension policy of attracting foreign capital through capital markets. This policy not only accelerated liberalization, corporationalization and internationalization of financial markets, but also speedily connected its financial market to international financial markets.With WTO accession, Mainland China broke trade obstacles such as limiting foreign traders' business links, and percentage of import and export. This movement encouraged the export percentage of high-tech products up to 20% of all. The prompt development of electronic industry activated the electronic stock quotation in China. To the economy, electronic stocks are always the major stocks which embrace much capital and preference. The content and character of electronic industry are faraway from conventional industry. It is easy affected by political and economic factors, carrying high uncertainty. If the investing risks are excessive, it will lower the inclination of risk averters. Therefore, taking systematic risk as the foundation of risk adjusting return is a critical index for investors making decisions.This thesis will study on electronic stocks and adopt market model to estimate thecorrelations between rate of return of stock markets and systematic risk across-strait. Hope through the estimation and compared analysis, we can find out the variations of stock market portfolios and rate of returns. The empirical results from integrating stock market datum across-strait are as follows:(1) The empirical result of capital asset pricing model (CAPM) - market returns and single stock returns of three stock markets have positive relationship. It is a high-risk and high-return relationship. Therefore, three stock markets across-strait are suitable for CAPM.(2) The empirical result of cross-section analysis- single stock systematic risk and average return of Taiwan electronic stocks and Shanghai electronic stocks of stock A are apparently negative relationship. Yet, Systematic risk and average return of Shenzhen electronic stocks of stock A do not have clearly relationship. Investors should depend on this result and invest in those low systematic risk stocks, because of their high average returns. Shenzhen electronic stocks of stock A are not in this count.(3) Examining three stock exchanges across-strait, the distributions of electronic stocks' systematic risk have noticeable variation but the distributions of average return do not have clearly variation. Moreover, the highest average level of systematic risk is Taiwan electronic stocks with 145.06, the second place is Shenzhen electronic stocks of stock A with 88.79, and the lowest is Shanghai electronic stocks of stock A with 77.52. The highest average level of return is Shanghai electronic stocks of stock A with 126.33, Taiwan has 122.50 in the second place, and Shenzhen is the lowest with 116.57. Therefore, investors who are of risk averters invest in three stock exchanges across-strait should choose Shanghai electronic stocks of stock A as the best buy.