An Empirical Research On Factors Influencing Stock Returns Of Listed Companies In China

With the development and regulation of China's stock market, the factors which influence investor's behaviors and stock returns have become more and more complicated. To get a thorough understanding of these factors and the characters of our market will have a far-reaching significance in establishing a healthy running mechanism, improving the quality of listed companies and providing investors with reliable information and scientific guidance.The paper theoretically analyzes the factors influencing stock returns from different aspects. On the basis of that, we have an empirical research on the possible factors which may influence stock returns of the our listed companies. From a micro aspect, we choose 20 factors which contain not only those widely focused from domestic and abroad, but those rarely considered in present empirical research. These 20 factors include β that can reflect the market, and financial indicators that reflect the managing status of the listed companies, such as balance-managing ability, liquidating ability, cash flow and potentiality of growth, ect. Our research uses multifactor model combined with cross-section regression and econometrics and analyzes 157 listed companies in Shanghai and Shenzhen Securities Markets from June 1st, 2001 to May 31st, 2002.After careful empirical research, we find that β is the most dominating factor influencing the returns except one or two industries. We also find that β and stock returns are negative linearity correlativity which is obviously in contradiction with traditional theoretical hypotheses. In the meanwhile, we find β is very unstable and quite weak at long-term prediction of stock returns after the in-depth research. In addition, we also find that the factors influencing the stock returns in different industries are not the same, which shows that industry is also the important factor to influence stock returns.Our research shows that when share prices are with downward tendency, financial indicators have impact on th stock returns as well. It also shows that "flock behaviours" exist in our stock market on the whole. However, in a couple of industries, stronger comprehensive financial information appear among these prominent factors. In a sense,it indicates that investors have begun to utilize financial information in a comprehensive way.