Study Of Conditional Asset Pricing Model And Investor Sentiment Based On High-Prequency Data

Capital Asset Pricing Model assists that market risk is the only factor determined the stock price. Market risk covers all existing risk factors in capital market. However, with emergence of more and more financial anomalies, people began to doubt the capital asset pricing model. Fama and French studied empirical research of the U.S. stock market and proposed the classical three-factor pricing model which held that the market factor, size factor and value factor together affect asset price. However, three-factor model still can’t explain momentum effect in stock market. The efficient market hypothesis (EMF) proponents argue that the reason why asset pricing model can’t explain the growing number of financial vision is not because of market inefficiencies, but because the CAPM model ignores the risk’s changing trends. Asset Pricing Model gradually develops into the conditioning time-varying model.In this paper, we use non-parametric estimation method-utilizing the data-driven method-to find the best estimated window width, and conduct FF three-factor model empirical research using Chinese A-share market2000-2011Days Degree data. By contrasting non-parametric estimation results with the classical rolling window estimation results we found that non-parametric methods, no matter in degree of fit or model residuals, were superior rolling window estimation. Through testing long-term pricing errors and point pricing errors we found that non-parametric estimation method is more suitable for Chinese stock market. Then we conducted a three-factor model of pricing factors testing and found that in the up and down stock market pricing factor testing the market factor and size factor went through the pricing factor test, but value factors did not pass. The result illustrated that in Chinese stock market only the market factor and the size factor are pricing factors; the corresponding system risk determines the price of the portfolios; The value factor caused only by the idiosyncratic risk. Market risk would not compensate for value factor since value factor is not a pricing factor in China.Based on the empirical results, we use a factor which have a great influence in determining Chinese stock price-investor sentiment indicators to substitute value factor which does not pass the pricing factor test, and conduct empirical data research covering2000-2011year China A-shares Days Degree. Evidence shows that although the improved three-factor model behaves weaker in empirical effect than the FF three-factor model, but improved three-factor model passed the test of pricing factors, suggesting that investor sentiment factor in the Chinese stock market is a pricing factor, the corresponding risk decides the price of the asset portfolios.