Study On The Size Anomaly And Its Causes Of Banks Listed In China's A-share Market

Capital asset pricing model(CAPM)is one of the most important models in the field of modern financial asset pricing.Many scholars have done a lot of research on CAPM model by using data from different countries and different regions in different time periods.However,with the in-depth study of the model,some anomalies that could not be explained by the model were found in the 1980s,such as the size effect and the book-to-market effect.Based on lots of empirical research,Fama and French proposed the three-factor model.The model shows that the return of market risk,the company size and book-to-market ratio can basically explain the cross-sectional differences of expected stock returns.At the same time,it can explain most abnormal phenomena.Many domestic scholars have devoted themselves to the research of the three-factor model,especially the empirical analysis of the entire securities market in China.However,there are less of studies on the adaptability of stocks in a specific industry,so the empirical tests of the size effect in a specific industry is very rare.Since Shenzhen Development Bank was listed on the Shenzhen Stock Sxchange in 1991 and became the first commercial bank listed in China,by the end of June 2019,A total of 32 commercial Banks in China had successfully listed on the domestic A-share market.Over the past 20 years,under the background of China's reform and opening up and rapid economic development,China's banking industry has gradually completed the reform and listing,and played an important role in Chinese stock market.Therefore,this paper systematically studies the existence,performance characteristics and reasons of the size anomaly of banking stocks using the samples of 28 Banks listed in China's A-share market.Based on the theories of capital asset pricing and behavioral finance,this paper focuses on the following aspects:first,the paper tests the existence of the size anomaly of Chinese bank stocks;Secondly,the paper analyzes the size anomaly of Banks from the perspective of risk factor pricing,behavioral finance and banking industry characteristics.Thirdly,the paper analyzes the performance characteristics of the size anomaly of Chinese bank stocks.Fourth,this paper analyzes the causes from the perspective of risk factor pricing,behavioral finance and banking industry characteristics.Accordingly,chapter three to chapter six of this paper respectively studied the above four problems.The main research methods in this paper are the method of grouping test,the measurement of portfolio spread and the method of back test.In this paper,the grouping test method is used to divide the Banks' sample into three groups of different size combinations according to their different sizes for comparative analysis.On the one hand,the measurement error can be reduced by grouping test method,and on the other hand,it provides a comparable basis for this research.In addition,the existence of size anomoly is tested by the portfolio spread method.In addition,this paper uses the back measurement method to investigate the duration of the size anomaly of listed banks in China.In this paper,the main conclusions are:First,if regarding the circulation market value or the total market value as the measurement of size,Chinese A-share listed Banks have the significant size anomaly.As comparing with the medium and small sized banks,the large sized banks have significant positive abnormal returns.If we long a large sized portfolio,and a short medium and a small sized portfolio,this arbitrage can gain significant positive abnormal returns.Secondly,the size anomaly in Chinese listed banks has no long-term holding chacteristics,it is a short-term behavior.A size arbitrage portfolio gains only for a short-time holding period and disappears completely when the holding period reaches to 12 months.The return of the size arbitrage portfolio shows a strong time-varying characteristic in the sample period from January 2008 to June 2019,which is due to the return of small-sized Banks'strong volatility.Thirdly,the liquidity risk is difficult to explain the size anomaly of China's listed Banks,that is,the higher returns of large-sized bank stocks are not due to the greater liquidity risk they bear.Mispricing caused by investors' trading preference is one of the reasons for the size anomaly of Chinese bank shares.However,neither overreaction nor incomplete information can explain the reasons for the size anomaly of Chinese bank shares.In addition,ROE has a certain ability to explain the abnormal returns of banks'arbitrage portfolios.In this paper,the probably academic contributions are listed in the following aspects:first,from the aspect of the research content,most of the research on the size effect are excluded the financials firms,but in this article,from the perspective of the banking sector,we have a systematic and comprehensive study on the relationship between bank size and return,to enrich the research on the size anomaly of Chinese bank stocks.Secondly,from the perspective of research methods,most domestic studies of the size effect are based on the perspective of traditional finance theories,such as using CAPM and Fama-French Factors Model to explore the existence of size effect.However,this paper also considers the theory of behavioral finance into the study of size effect to make the research methods more comprehensive.Finally,from the research results,the size anomaly of bank shares in China's A-share market obtained in this paper is completely different from that in the US stock market,which also provides a reference for the subsequent research on the differences between Chinese and American bank shares.