| Although China’s securities market has become the world’s second largest capital market,there are still various pricing anomalies in the market,which seriously affect the function of market resource allocation.Compared with the attention of other anomalies and the degree of academic research,China’s research on the premium effect of low-priced stocks is slightly insufficient.Compared with foreign scholars’ research on the premium effect of low-priced stocks,domestic scholars have relatively little research on this anomaly.In recent years,scholars have gradually explored this topic.In view of this,this thesis carries out a series of researches on the topic of "low-priced stock premium".Firstly,variable grouping and Fama-Mac Beth regression method are used to verify the existence of the premium effect of low-priced stocks in China’s A-share market.Secondly,from the perspective of prospect theory,the formation mechanism of the premium effect is explained.Thirdly,the pricing role of nominal price factors is discussed.Finally,the return of the investment strategy constructed by the nominal price is discussed.This thesis is mainly divided into seven parts.The first part is the introduction,which mainly introduces the background of the topic,research significance,literature review,research content,research methods,innovation and deficiency.The second part is the theoretical basis of this thesis,which systematically reviews the traditional risk pricing theory and prospect theory.Based on this,the premium effect of low-priced stocks and lowpriced stocks are defined.The third part is the empirical basis of this thesis,which mainly verifies the existence of the premium effect of low-priced stocks.The fourth part explores the causes of the premium effect of low-priced stocks.The following part is the applied research on the low-price stock premium effect,which consist of the research on the nominal price pricing study in the fifth part and the nominal price investment strategy analysis in the sixth part.The last part is the conclusions and prospects.The main conclusions of this thesis are as follows:First,there is a premium effect of low-priced stocks in China,which is mainly reflected in short-term trading.This thesis verifies the premium effect of low-priced stocks from two aspects of portfolio and individual stock analysis.In the portfolio research,this thesis uses the traditional risk pricing model to explain the excess yield of low price and high price stocks.At the level of individual stock,the regression method of Fama-Mac Beth(1973)is used to discuss the impact of nominal price on the premium effect in the market.At the same time,this thesis finds that when the holding period is longer than one month,the cumulative yield of high-price stock portfolio is higher than that of low-price stock portfolio,thus indicating that the premium effect of low-price stocks mainly exists in short-term trading.Second,from the perspective of prospect theory,the thesis found that the premium effect of low-priced stocks is mainly caused by the irrational behavior of investors.Prospect theory mainly discusses how decision-makers make decisions under risks.Referring to Barberis et al.(2016),this thesis uses the return of the past 48 months as a substitute for predicting the future return of the stock,and uses the prospect theory value(TK)to describe the characteristics of investor behavior,that is,investors will overestimate the tail probability of return distribution.Based on this,this thesis discusses the impact of TK on the premium effect of low-priced stocks from the level of portfolio and individual stocks.The study finds that the prospect theoretical value has a good explanatory power on the premium effect of low-priced stocks,that is,the premium effect of low-priced stocks is mainly derived from the irrational behavior of investors.Third,although the nominal price factor is not a redundant factor,it has limited pricing power to the market.Based on the premium effect of low-priced stocks in China’s A-share market,this thesis constructs the hedge portfolio of low-priced stocks and high-priced stocks according to the nominal price characteristics and monthly data,and uses it as the nominal price factor.The nominal price factor constructed in the thesis is verified by the time series test of the traditional factor pricing model,the nominal price pricing factor is verified that it is not a redundant factor,and then it is included in the Fama-French three(five)factor model to construct the four-factor factor and six-factor model containing the nominal price factor.The explanatory effect of the models on the excess returns of the portfolio is only improved to a certain extent after the GRS test,which indicates that the nominal price factor has limited explanatory power on the market anomalies.Fourth,nominal price investment strategies have different market performances with different scenarios.This thesis constructs a portfolio(Low-High)at nominal prices,and the return in the full sample interval is not much different from that of the bull market;in every February,a relatively high return will be obtained.But when the stock holding period is longer than one month,the cumulative return of the portfolio is less than zero.Therefore,when investors use nominal price as a single indicator to formulate investment strategies,they should fully consider the market conditions,holding periods,investment months,and timely adjust investment strategies according to the market investment environment and expected holding period.At the same time,the thesis combines the scale effect,gambling effect and turnover rate effect to construct a cross-investment strategy,which provides a reference for investors’ investment behavior.The innovations of this thesis are as follows:First,in the research on the existence of the premium effect of low-priced stocks in China’s A-share market,this thesis systematically proves the existence of the premium effect of low-priced stocks in China’s stock market from the level of portfolio and individual shares.It further deepens the research content in dimension and makes the conclusions more abundant and reliable.Second,from the perspective of prospect theory,the thesis discusses the causes of the premium effect of low-priced stocks.Based on the existing literature,this thesis explores the impact of investors’ irrational behavior on the low-price stock premium effect from the perspective of prospect theory for the first time,provides a new research perspective for the study of the premium effect of low-priced stocks and other anomalies.At the same time,this study also expands the application of prospect theory and further enriches the related research of behavioral finance.Third,the pricing factor constituted by anomalies is supplemented.Based on the existence of the premium effect of low-priced stocks,this thesis constructs a nominal price factor based on monthly data,and discusses the redundancy and pricing power of the pricing factor,which provides literature support for subsequent related researches.Fourth,it expands the existing research related on the formulation of investment strategies.Relying on the premium effect of low-priced stocks,this thesis takes nominal price as an indicator to formulate investment strategies,and deeply discusses the market performance of the investment strategy in different market conditions,holding periods,months,and different market anomalies.It provides a reference for individual investors’ investment decisions. |
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