A Comparative Study On The Three Factor Model Of Asset Pricing

Asset pricing has always been one of the important areas of financial research, the traditional CAPM is not always received strong support and it can not explain most of the abnormal phenomenon, so the scientific understanding of the inherent laws of the stock price behavior, and correctly pointed out that the pricing model is a urgent problems to study and solve in the theory and practice of community.Therefore, based on the expanding in the range of research and volume of samples, this paper intends to use the methods of Fama and French(1996), and collect relative dates of Shanghai stock market and Shenzhen stock market in China from 1997 to 2008. Constructing three factors model by the intrinsic value of the stock factor, market factor and liquidity factor compare with the traditional Fama-French three-factor model and CAPM model tests. We found that the following conclusions by empirical studies from the three-factor pricing model and the CAPM model: (1) The coefficient of market factors are more significant, and all more than 0.8 in Fama and French three-factor model, SU three-factor model and the CAPM model, indicating the market risk is the most important factor impacting the excess return, the market's strong power driven stock market rose and fall in the same direction. (2) three-factor model can describe cross-section of stock returns changes better than the CAPM model. (3)There is a significant "scale effect" in China's stock market, but no significant "book value to market value effect." (4)The three-factor model base on to the liquidity factor, intrinsic value factor and market factors can explain the China portfolio excess return changes better than the Fama-French model...