The Asset Pricing Model With Consumption Based On Simultaneous Equations

The modern western financial study covered three major areas: asset pricing, corporate finance, and financial markets, financial intermediaries and financial regulation (Chen and Wang, etc., 2008). On the study perspective, Asset Pricing majorly focused on reasonable pricing of assets in the financial markets, and promoting effectively price formation process and mechanisms .It's a cutting-edge research disciplines of modern finance theory. In this context Asset Pricing theory makes the continuous development and progress. The innovation and evolution of Asset Pricing Theory is a sign of the development of modern financial economics.The development of China's capital market has experienced twenty years, however, in such a scratch, the process from small to large, the market really has exposed a number of unavoidable problems, such as serious speculative, highly investment risk, and poorly supervision and so on, but certainly this process should be achieved, while that in such a short time to establish the integrity of our capital markets is impossible, so keep exploring and developing the way of financial markets is our responsibility. Examining and addressing the process of improvement in the market pricing mechanism, and effectively avoiding the risk of market volatility will be the top priority in this phase. Reasonable and effective inspection and assessment of the correctness of the underlying asset pricing theory is particularly important,so that policy makers and investors can make right dicisions.In this paper, under the premise of classical asset pricing theory, based on previous research results, we analyze the adaptability of different prcing models, a summary of empirical test results are given with some models.And follwed by recent research, CCAPM model has been modified to reflect the market liquidity effect on asset prices, and a relatively complete construction within the framework of consumption-based pricing model of simultaneous equations to reflect the asset pricing process of interaction in the economic system, which makes up the weakness of some models considering only one-way contact defects.Through a summary of previous research, and objective evaluation of the existing asset pricing model, the paper tries to improve the CCAPM model with enhancing its practical explanatory power, while the simultaneous equations model to describe the relationship between variables in a system. This modern asset pricing theory of consumption based capital asset pricing model. Taking full account of impact of liquidity on asset prices, the model tries to makes the pricing basis to reflect the flow premium by the introduction of mobile factors.And With refference of inherent logic correlation between the variables, we construct simultaneous equations modle in the economic systems, then verify the relationship between variables through long-run equilibrium. This is in part makes up the defects of the existing asset pricing models considering only one-way relationship between variables, and the introduction of liquidity variables helps improveing the effective of the original model in some extent.Innovation of thisresearch are as follows:(1) Contemporary classical asset pricing models are sorted out and fully analysed, include the application of the various models and their weakness, and then the empirical validity of the models also be expansed.(2)The liquidity factors of the economic system is divided into internal and external,namely internal and external capital market liquidity; Introduct the measurement of internal liquidity from foreign scholars; Through the introduction of liquidity variables, the original model was improved.(3) The application of the constructive manner in the simultaneous equations model to describe the process of asset pricing relationship between variables; and the improved model is applied to different countries (regions), both from the timing and interface aspects of the model data significance for the Analysis and deepen the actual explanatory power of model understanding. This article emphasizes theoretical and empirical research in both the premise of the application of dialectical analysis of reasonable comment on the related model; also based on the strengths and weaknesses of existing models, the model gradually improved and amended; application of qualitative and quantitative methods to test the improved model, In the general equilibrium framework to solve the interaction between the relevant variables. This framework of this research:Chapter 1 is preface, pointing out the research background and significance, research ideas and innovation, and the framework.of this study andChapter 2 sorts out the asset pricing theories,and gives some guidence of following text.Chapter 3 based on Chapter 2, analyses the application and inadequatement of asset pricing models and, and cites the relevant empirical findings.Chapter 4 ,firstly consider the original CCAPM model with a multi-angle, then construct simultaneous equations pricing model with liqudity factors, and gices a empirical test with selected contuntries(origions), obtaining some useful conclusions.Chapter 5 is a comparison of different pricing modles including the simultaneous equations modles.The basic foundings of this paper are:First, this study of contemporary classical asset pricing model is sorted out and on this basis, the application of the various models and inadequate, and through the application of empirical validity than the model. Then the introduction of liquidity variables, the original CCAPM model is improved and constructive application of the CCAPM simultaneous equations model to describe the process of asset pricing relationships between the variables. And the related model and improved model of this paper an empirical test, respectively, data from the timing and characteristics of the two cross-section view of the model is to distinguish type analysis to obtain the following basic conclusions:1) In the timing analysis results, a single equation CCAPM where there is reasonable and can reflect the basic relationship, but this relationship is not obvious, the significance level is not high. CCAPM simple simultaneous equations system in the explanatory variables associated with certain words on the right. The introduction of liquidity variables and the introduction of a single equation CCAPM external liquidity of simultaneous equations of variables relative to the CCAPM model is not introduced, a significant level in more than a raise. The introduction of liquidity variable simultaneous equations CCAPM more variable reflects the important role of liquidity, its lack of explanatory power system related, in part highlights the mobility of factors of an intermediary.2) General as a whole, under the section data characteristics, including liquidity variables CCAPM model of simultaneous equations of several asset pricing model than the other superior, the model not only gained significantly more to upgrade, while the reflected the internal systems related to other models can not match, even if does not contain the mobility relative to the simultaneous equations model is also relevant in the system is very prominent, which further enhances this focus on the liquidity variables.Based on useful results obtained from reserch, the capital market managers and market investors should concern the movements of asset price in at least two levels, the first is the correlation between variables, which not only included in this article., but should cover all basis within the relevant macro and micro variables.Observations and explorement of the interactive relationship between variables will help explain changes in asset prices and market behavior. The second is the liquidity variables. Liquidity variables on the one hand reflected the general run trend, on the other hand is a characterization of individual behavior on the capital market, so a reasonable assessment of market liquidity and the grasp of the market is bound to increase the effectiveness of policy implementation and to determine the investment accuracily.