Downside Risk Premia: The Theory And Evidence Of Stock Market In China

Return and risk of financial property are two important factors which influence investment decision. A reasonable investor always hopes to know profit or loss of the property in advance, and always regard utility—maximizing as an in pursuit of target. Therefore, solving the relation (also a property list pricing) between the income of property and risk has been the diligent direction of the economist. Through analysing the reason of failure of CAPM and APT model in practice, This text theoretically carries on an improvement to the existing model from the two side: One from the series of expected utility , because distribute of the property rate of return disobey normal school, the higher moments are not zero, and because the theory of higher four-moments is still not perfect, we launch the function to three moments, four moments and find two factor of skewness and kurtosis; Two from the true in the mind of investor, the investor disgusts loss, for higher possibility of loss of property (namely the higher of downside beta), only if this property has higher of rate of return, it can draw on investor to purchase. So risk of the loss also is the important reason which influences rate of return. In addition, we find that although investor like profit, the returns of property which is higher possibility of making a profit are usually lower and explain upside beta will also influence the rate of return of property. Because of having already considered unconditional beta in our model, so while considering condition beta, the risk should deduct unconditional beta is real to influence rate of return of the conditional beta factor. In end, we build the model including the risk factor: Unconditional beta, relative condition beta, skewness, kurtosis.The text regards shanghai stock market as a research object, and adopts the stock of daily rate of return in 2000—2004 years to prove the argument of this text. Before demonstration, we divide the total term into two segments period: The first stage is a formation period and the second stage is an examination period. In the next examination process, this text don't directly carries on analysis with the sample data, but the method that the set which adopts a cent construct, so this advantage lies in removing non- system risk to prove the accuracy the demonstration. At first, we prove the relation of between the risk and rate of return of the condition beta, especially downside risk in expiation of function for rate of return, and discover that rate of return and downside beta change with same direction, with upside beta present opposite direction; Then make use of the risk value of first stage calculation to carry on cross section test, certificate originally the level of notability in the model; Finally we analyze the different effect to rate of return between downside risk and skewness, and explain this both can't be completely substituted.In conclusion, theories and evidence in this text both express that the factor of influence exceed of rate of return not only has unconditional beta, but also should consider high moments and condition beta at least, so this model of asset pricing just more actual circumstance according to property.