Risk And Return Analysis Of Chinese Stocks In NASDAQ

Without a robust procedure for identifying and dealing with risk, the information,reputation and finances of a business are all in danger. Since2010, the volatility ofChinese stocks in NASDAQ has been increased rapidly. However, currently, thereis no stock index future fitting for hedging investment risk on them. This thesisdoes search and analyze on financial data and then proposes some hedge strategiesfor specific type of investors.Asset pricing theory is one of the key contents of financial theory. Unfortunately,the empirical record of CAPM is poor. Based on the30Chinese listed firms inNASDAQ, this thesis sort portfolios, examine the book-to-market equity effect,size effect, and compare two assets pricing models-CAPM, there-factor model.And evidence suggests the three-factor model is better than CAPM.Campbell, et al (2001) used a disaggregated approach to study the volatility ofcommon stocks at the market, industry, and firm levels. This thesis uses the samemethod and found the firm level volatility is dominant in Chinese stocks inNASDAQ. And then list short sell companies and analyze the reasons.This thesis is organized into five sections. Section one covers a brief introductionto Chinese stocks in NASDAQ, research motivation and meaning; covers aliterature review of stocks risk and return analysis; data set and methodology.Section two introduces the test methods of CAPM, book-to-market, size anomaly.And then it empirically analyzes the book-to-market effect, size effect, and CAPM.Empirical results suggest that the three-factor model is better than CAPM. Sectionthree introduces volatility decomposition method. Empirical results suggest the firm level volatility is dominant in Chinese stocks. Section four introduces ourhedge strategies using options and Hu-Shen300stock index future. Section fivedraws a conclusion and makes a prediction of future.