Chinese Stock Market Univariate Conditional Capital Asset Pricing Model Empirical Testing

The test of CAPM is a hot topic in the domain of finance. It is of greatimportance for asset pricing and economy forecasting to test whether it can berejected or not for CAPM in test. In this paper, we study CAPM in China stockmarket, applying a ARMA-GARCH-in-mean lag specification on data in daily weeklyand monthly time interval. The ARMA specification controls for nonsynchronoustrading effects in the mean equation. The GARCH specification controls fortime-varying heteroscedasticity. The result shows that conditional CAPM cannot berejected in SSE A Share in daily time interval in Shanghai Stock Exchange and SSE AShare Composite Index in daily time interval, SSE A Share Component Index inweekly time interval and SSE B Share Component Index in daily time interval. Thatmeans that both Shenzhen stock market and Shanghai stock market reject CCAPM,from terrain perspective, and the difference is that A Share in Shanghai Stock marketsupports CCAPM while B share in Shenzhen Stock market supports.