A Comparison Between Information Adjusted Behavioral Assets Pricing Model And CAPM

In Reality, traditional capital asset pricing model is being questioned in a variety of aspects, First, this paper analysis the existing problems of China’s securities market. Second, using empirical research to demonstrate the failure of weak form efficient market hypothesis in China’s securities market, then, from behavioral finance perspective, detailed noise trading risk concept and mechanism,using the empirical test measured the presence of noise trading risk of China’s Shanghai stock market and Shenzhen stock market, and its significance to the excess yield.Finally, based on the phenomenon of noise trading in the stock market, i had analyzed the problems of China’s securities market, and making some policy recommendations.This dissertation is divided into8parts; the first chapter is an introduction, a brief discussion of the purpose of this study, described the research background and research methods. The second chapter is a literature review, and consists of two parts:first introduced Fame efficient market hypothesis theory and then describes the process of the development of portfolio theory, explaining how the systematic risk and non-systematic risk affect the value of the stocks, the second section describes the development of behavioral finance, highlights the emergence of noise trading risk theory, through analyzing interaction between noise traders and arbitrageurs in the stock market, leading to the securities prices deviate from their intrinsic value. The fourth part consists of the problems in the Chinese stock market, making empirical test about weak-form efficiency of China’s Shanghai and Shenzhen securities markets. The fifth part is the most important in this article, applying the traditional capital asset pricing model and the behavioral capital asset pricing model by selecting a series stocks among different external environment, then using SSE50Index and the Shenzhen Component Index instead of DVI trading index. Making regression analysis, computing the difference between traditional Beta and behavioral Beta, finally, calculated noise trading risk.This article concluded as follows:1. The value of Noise trader risk in Chinese market may be negative, but the noise trader risk is negative does not mean that there is no noise trader risk, the price fluctuation of stocks due to interaction of arbitrageur and noise traders in different market environment. The company’s fundamentals and the economic cycle and other factors at the same time also influence the stock price, but as long as there is a significant difference between the two betas, it is the evidence of the presence of noise trader risk.2.By comparing the significance of behavioral Beta and traditional Beta, the behavioral Beta shows stronger explanatory than traditional Beta to explain excess yields,so the behavioral Beta is more appropriate to describe the excess returns of the stock market,the market portfolio yield shows that the behavioral capital asset pricing model play an imperative role in pricing. China’s securities.3.Noise trader risk does not necessarily exist negative correlation to securities excess yield, this conclusion is different from the results of previous studies which claim the noise trader risk must be positive correlated to excess yield, i questioned about that.