Researches On The Evolution Of Capital Asset Pricing Theory

Asset pricing theory is one of the most important backbones in finance. As a theme in the front edge of financial research fields, it got widely attention in the 20th century. The most famous asset pricing models include CAPM, APT and OPM. They construct a solid foundation for asset-pricing theory's brilliant status in financial theory. However, looking back the development of asset pricing theory in the last nearly half century, we will find many other models with great theoretical value emerging such as Consumption-based CAPM, conditional CAPM and so on. Although these models haven't got widely used in practice today, they play an important role in enriching and improving the asset pricing theory's framework, they seemed as a ladder lead to asset pricing theory going forward continually. Unfortunately, the acdemic circle in our country has known little about these models, much less the whole knowledge about the evolution of asset pricing models. Thus, this article attempts to do some summarizing and analyzing work for the establishment and development of asset pricing theory; so as to bring some inspiration for our country's conducting researches on asset pricing theory and empirical test. Firstly, this article presents a historical review of some classical asset pricing theories developed in the 1960s-1970s and their empirical tests. These models have become the paradigms of research into asset pricing theory, based on which many subsequent new models are derived. During the process of theories reviewing, some basic modeling ideas and theoretical limitations are analyzed. While in the empirical tests part, we first introduce some empirical test methodologies to asset pricing models, then point out the main restraints in models testing. Since 1990s, the discussion about asset pricing anomalies becomes a hot issue. So, this article mainly considers two kinds of anomalies. One is referred as CAPM anomaly, which includes size effect, book-to-market equity effect, long-term return reversals effect, short-time momentum effect and etc. The research on this kind of anomaly focus on three aspects: empirical test bias, model revision and market inefficient. The other is CCAPM anomaly, especially the equity premium puzzle. Preference modifications, imperfect market and traction cost are often used to explain it. Finally, in view of behavioral finance having strong power to explain the asset pricing anomalies, we further pay much attention to the development of behavioral financial theory.