Comparative Study On The Application Of Asset Pricing Models To Shanghai A Stock Market's Ex Ante And Post-share Reform

Assets pricing is a core issue for the development and improvement of financial market, and also a fundamental problem for finance study. On one hand,the assets pricing study will enhance investors'risk cognition, and offer solid facts for investing decisions and portfolio hedging; on the other hand, it will excavate the mispriced assets and provide new arbitrage opportunities through the arbitrage portfolio construction to obtain risk-free return. At the same time, the market assets pricing factors analysis will provide new insights for the financial-products designer to weigh out and quantify the risk-return relation and more reasonable and welcome financial products with better resources allocations are likely to be supplied; Moreover, asset pricing models will guide supervisors to judge whether the current asset price is priced rationally and reasonably, and provide theoretical and operable guideline for the financial market rules implementation. The study on the application of assets pricing models before and after the shares reform in our stock market will favor the market participants easier and better understanding of the risk-return changes, such as the systematic risk and liquidity risk et al, and better use of the risk-return relations to participate the financial market, and hence push forward the market to better function. Furthermore, it will render shareholders better assessment of the Shares Reform from the prospective of asset pricing, and subsequent release of shorting and margin financing and so on, the most important events and innovations for financial markets, and recognition of these reforms from the market microstructure angle, and realize the significant impact these reforms brought about.Based on the existing research findings home and abroad, we inquire the applicability of the assets pricing models before and after Shares Reform, including "capital assets pricing model,Fama-French three-Factor model and liquidity-adjusted CAPM model,and employ A share data in Shanghai Exchange to construct stock portfolios to analyze and compare the assets pricing models applicability before and after the Share Reform by the time series and cross section regressions.On the time series side, with reference to the Farria-French (1993) method, we make up 25 stock portfolios by size factor (ME) and ratio of book value over market value (BE/ME),and test the traditional capital assets pricing model, FF three-factor model andliquidity imbedded CAPM four-factor model and conclude that the systematic-riskhave reinforced after the Shares Reform due to the market liquidity improvement and stronger market fluctuations, ME and BE/ME factors have significant explanatory ability for the portfolio return and less effect after the Shares Reform, and liquidity risk is priced markedly and liquidity risk price has decreased after the Reform due to the better liquidity environmentOn cross sectional study, we construct 20 stock portfolios by Amihud(2002) illiquidity index in a increasing order based on the LA-CAPA model proposed by Acharya & Pedersen(2005), and run the cross sectional regressions, finally conclusions are:for all portfolios, the excess return is higher after the Reform, systematic and liquidity risk premiums are statistically lower that the risk factors price, showing that there may exist other overlooked but priced already risk factors.In sum, after Shares Reform, regardless of time series and cross sectional regressions, we discovery that market risk factors, such as systematic risk, ME factor, BE/ME factor and liquidity risk have much different explanatory ability after the Reform, and the pricing efficiency has increased.