Conditions Of The Capital Asset Pricing Model And Empirical Test In The Chinese Stock Market

China's stock market had never experienced such a prosperity which started from last year with the positive effect of series reformation policy on stock market was shown. A lot of investors hustled in this market for high returns. Rational investment decision which established on the clear comprehension of relationship between return and risk is very important to the investors. Valid theory tools on estimating value and risk are remarkable useful to make this happen.Capital Assets Pricing Model (CAPM) is a very important theory model to explain the connection between return and risk; however, it was not quite effective in a lot of empirical analysis. So, conditional CAPM was brought out to make an expansion to CAPM. It was effective proved in some empirical analysis. What is on earth the CAPM or conditional CAPM? Will they explain China's stock market and give instruction to Chinese investors? The above questions will be answered in this article.Above all, we will introduce the form and content of CAPM and conditional CAPM, empirical analysis results and clarify two aspects in the development by reviewing the literatures. Then, we use the model or simplified model which generated from different aspects to make empirical analysis on China stock market, and make the conclusion that conditional CAPM can not explain china market comprehensively as well as CAPM.