The Empirical Analysis Of Applicability Of CAPM On Real Estate Stocks

As one of the troika of the Chinese stock market, real estate stocks play an important role. The particularity is that it subjects to the impact of the policy control extremely, so I will test CAPM, the FF CAPM, the Carhart four-factor model and liquidity four-factor model on such a special industry and making an empirical analysis on returns of real estate stocks. To study the role of liquidity in the stock pricing, use of the turnover index creatively to structure liquidity factor, and constructe liquidity four-factor model. By comparing the test results and regression coefficient, make analysis the value effect, the momentum effect and the liquidity effect on real estate stock, to test the applicability of the CAPM in Chinese real estate stocks.The empirical results show that the classical CAPM model has less explanatory power;By introducing scale factor SMB and value factor HML, the FF three-factor model’s explanatory power is significantly;The momentum factor of Carhart four-factor model--MD1and MD2can not improve the model’s explanatory power,so that Carhart four-factor model does not apply in China’s real estate stocks. the liquidity factor TR effectively improve the explanatory power significantly, showing that the liquidity four-factor model applies in China’s real estate stocks. Based on the iquidity four-factor model, test results show that the scale factor SMB explain large-scale portfolios effectly, the value factor HML and the liquidity factor TR make the same effect to six portfolios of real estate stocks. Real estate stocks exists "mass effect", this effect is emerged as a result of the real estate industry unique business and financing models. Lastly, make a realistic explanation to real estate stocks "liquidity effect" and other implications of the model explanatory power factors.