The Empirical Test Of CAPM On The Iron Industry Of China

With the developing of Chinese industry degree and the iron industry, the China iron industry developed most rapidly. In the next few years, the development of the China iron industry will impact the developing of the China industry. So it is vitally important for the China industry to grow steadily. When China became a member of WTO, the competition in iron industry became more and more fierce and people all over the world pay much more attention to China iron industry. So, this paper chooses China iron industry for the research object.We do our research on the basis of other researchers and the traditional theorem of the CAPM. At first we make a simple introduction to China iron industry. Then we introduce some related theories of the CAPM. Then we use empirical test to try to find out whether the CAPM can be used to the China iron industry. At last, we give some reasonable explanation to the invalidity of traditional CAPM. In the recent twenty years, the focus on testing CAPM is notβ, but other non-system risking variables which can explain some part of the return. This paper selectedβand other risking factors such as company size, the ratio of earning to price and so on to do our research. We adopt two method to do our testing on CAPM. One is traditional cross-section regression and the other is Pannel Data model. The conclusion is that in recent stage, CAPM model is not fit for iron industry of China. In the meanwhile, we can say that the stock market of iron industry is not efficient.The meaning of our research is that we empirically test the CAPM of one industry not of one stock market. This paper adopts exact data and method and use the software of SAS to learn whether CAPM is valid to China iron industry. Hope that our research will be helpful for policy makers and investors.