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The Research Of Fama-French Three-factor Model For Shenzhen A Share Mainbord

Posted on:2013-02-25Degree:MasterType:Thesis
Country:ChinaCandidate:Y XiongFull Text:PDF
GTID:2249330377954623Subject:Finance
Abstract/Summary:PDF Full Text Request
Asset pricing is the core of modern finance, various asset pricing models attempt to identify the impact of asset prices and explain the yield differences between the various factors to guide investors make decision.Value investment theory present that some critical fianancial ratios can guide investors to get good returns. Whether various fianancial data and ratios reflecting company’s basic condition could capture the common variation in stock price is a bone of contention in investment academic circle, and it’s also an importent factor for investors. In the stock market, there are many financial phenomenon that affect the development of asset pricing theory, such as the phenomenon of scale, phenomenon of value effects. many scholars have proved that, factors affecting stock return are not efficient forever, and they just done well in some time and specific markets.Since1964, the capital asset pricing model (CAPM) has become mainstream in the research and practice in the capital asset pricing tool. Ross proposed arbitrage pricing theory(APT), trying to find more suitable for practical pricing models.APT believes that the securities gains for the K factor (risk premium) is a linear function of these factors to describe the basic economic system variable factor, but APT is not clear that the specific number of factors and content. However, access to the late1980’s, many studies have found that the traditional CAPM can not explain the phenomenon, known as market anomalies (Anomalies), which is more typical,but also can be widely recognized anomalies in the so-called economies of scale, the book to market value effect and long-term price reversal effect, short-term momentum effect and so on. Fama&French inspected the company’s size, book to market value ratio and the beta of the explanatory power of stock returns and found that after controllling for company size and book to market ratio of these two factors, beta does not explain stock returns. Based on these test results, Fama&French separate the size of the market value and the book to market value factors with an extremely clever introduction of the scale factor, book to market value ratio factor, the market portfolio factor, the three-factor model was constructed.their empirical research shows that the three-factor model is good at explain stock returns, but it is difficult to explain the meaning of the model variables by economics. The classic capital asset pricing model is constructed on several strict assumptions, such as the market is completely efficient, the trader’s transaction will not impact on asset prices and so on. But in reality, stock market is not a perfect market, there are various transaction costs, asymmetric information between investors, and the real market is not a completely liquid market.This paper identifies three common risk factors(including an overall market factor and factors related to firm size and book-to-market equity) in the returns on stocks of Shenzhen A Main Board Stock Market. The result shows that the market factor and factors related to firm size and book-to-market equity capture the common variation in stock returns.
Keywords/Search Tags:Assets Pricing, Fama-French three factor model, stock market
PDF Full Text Request
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