Empirical Research Of Multifactor Asset Pricing Model In A-share Market

Asset pricing theory and model is one of the most important research areas of investment theory and practice,which put more focus on capital market of western countries.Though current research in these fields is much more deeply than early stage,there still exist many aspects can be improved.So based on multifactor asset pricing model,this paper try to use theoretical derive and empirical validation to answer several questions in A-share market:(1)which factors can influence stock price in A-share market?(2)which pricing factors should be included in multifactor asset pricing model in A-share market?(3)what economic meaning have these pricing factors in pricing model?On theoritcal derive aspects,this paper derives listed company's stock pricing formula from the angle of company operation foundmental aspects,and give a propose of which pricing factors can make up of multifactor asset pricing model,ie.,factors related to asset current quality,factos related to asset potential growth,and factos related to investors' sentiment;Further,this paper use monthly data of A-share market from 2007~2018,and empirically validate findings and proposes in theoritcal derive,and give more research findings,that is,company operation foundmental aspects can explain most parts of stock pricing change in A-share market,even more,they can also support the conclusion of A-share market can forcast some bit of Chinese macro-economy trend with 8~9 months in advance.The research also finds there is strong negative relationship between company dividend and its PB in A-Share market.About investors' sentiment,this paper finds A-share market sentiment is positive related to stock price change,however,stock turnover and volatilaty ratio,last price change have negative relation with stock price change,and small companies in A-share market are more easily influenced by sentiment.Compared with large-size companies,the growth of small-size companies in A-share market is more related to M&A.About pricing factos analysis,this paper finds Roe factor related to company ROE ratio,Smb factor related to company market value,Net factor related to company net profit growth,and Hml_R factor related to cash dividend and PB ratio have more power to explain stock price changes than any other pricing factors,and the company operation foundmental aspects are foundmental power to influence stock price change in A-share market.About multifactor asset pricing model of A-share market,this paper gives following findings: the best multifactor asset pricing model of A-share market is composed by three pricing factors,which are Mkt+Smb+Net;the best four and five factors model is composed by additional Hml_R and Hml_R+Cma / Roe factors respectively.And performance improvement of model's intercept during past years validates market development and efficiency enhancement in A-share market.Besides,traditional pair trading strategy exist bankruptcy risk because of relying only on stock price calculation.This paper build new pair trading strategy based on effective pricing factors of A-share market,such as Roe,Smb,Net,and Hml_R,proposed by this paper,which can control other risks better,describe pair relationship of pair-stocks more precisely,and better combine co-integration and asset pricing theory together.Empirical study show that pair trading model based on multifactor asset pricing model can substantially improve pair trading profitability and stability.Findings above of this paper not only are consistent with related theories of modern finance,but also can make complementary contribution to domestics' asset-pricing research,investment practice and A-share market construction.