Empirical Study Capital Asset Pricing Model In Chinese Stock Market

Capital asset pricing model (CAPM) is an equilibrium theory based on portfolio theory, which has existed for over 50 years. After it was introduced into China, a lot of researches have been conducted by Chinese scholars, and most of relevant findings have shown that the CAPM have limited explanatory power to China's security markets.As China's stock market is running short, low maturity, speculative, and easy to be controlled in small cap, it is difficult to meet the assumptions of CAPM model. In the aftermath of the financial crisis, Chinese stock market has more and more standardized operation. In a certain extent, it may close to the assumptions of the CAPM model. In a sense, SSE 50 can be seen as a leader and model for Chinese securities market. Therefore, using SSE 50 as a model to test the applicability of the CAPM model in China's security markets will have a positive meaning to the choice of the pricing models in the future. It also has a positive meaning to the judge the market's effectiveness and to control the risk of stocks.This dissertation selects 20 stocks from the Shanghai Stock Exchange (SSE) 50 Index as the study samples, and the sample periods being from January 2005 to December 2006 and from November 2008 to February 2010 respectively. With corresponding monthly yield data, the CAPM model is estimated and tested. And the results for the two selected periods are compared. As can be seen from the comparison, theβvalue a value of interval from November 2008 to February 2010, is closer to the assumptions of the CAPM model. It confirmed the previous judgment.This dissertation has found that CAPM model has weak explanatory power to the stocks of the SSE 50 Index.. However, as the selected stocks are big, active, most influential, and high-quality blue chip stocks in the Shanghai stock market, they are not as susceptible as other stocks to market powers. This may be reasons why the CAPM model has better explanatory power to the SSE 50 Index stocks than in other situations.The characteristic of the dissertation:This dissertation selects stocks from the Shanghai Stock Exchange (SSE) 50 Index as the study samples. The CAPM model is estimated and tested respectively for two selected periods. And the results are compared. In order to determine the reasonableness of the range, in addition to qualitative analysis, I also establish the model and introduce the dummy variables to test the rationality of the selected breakpoint.