Research On The Factors Influencing The Abnormal Stock Returns

Fama proposed the efficient market hypothesis in1985, that any valuable information can quickly, accurately reflect to the stock price. Any investor cannot use open market information to gain benefits. However, the stock market anomalies (abnormal phenomena in financial market are size effect, value effect, momentum effect, reverse effect, the phenomenon of earnings smoothing) are about how to obtain excess returns, which is in clear violation of the efficient market hypothesis. Starting from the abnormal phenomena in the financial market, this article is to explore the factors behind the phenomena-financial accounting factors and investors’sentiment.This paper adopts empirical research method.In the part of theoretical analysis, we focus on the effective market hypothesis theory and its defects, and the capital asset pricing model (single factor capital asset pricing model and three factors pricing model), and behavioral finance transactions on non-rational people, and a variety of financial valuation theories, and various kinds of abnormal phenomena in financial markets.In the part of empirical study, we advise four hypotheses. The first hypothesis is to test the three factors of capital asset pricing model and whether the Shanghai A share market is consistent with the three-factor CAPM, and whether the size effect arises from small companies with large liquidity risk;The second hypothesis is to test the relationship between unexpected earnings and stock returns. Results showed positive unexpected earnings will lead to greater equity premium;The third hypotheses is about earnings smoothing phenomenon. Results showed that the earnings smoothing period of Shanghai A share market is6months. The information that is six months before the current unexpected earnings information will produce a positive impact on the current stock returns, between six months to12months no significant effect, a negative effect beyond12months.The fourth hypothesis is to study the effects of investors’sentiment on the equity premium, which is joined in the three-factor capital asset pricing model. The results showed the investors’sentiment had a positive effect on the stock premium.Finally, the paper proposes several recommendations to improve the effectiveness of China’s capital market.The study in the abnormal phenomena in the capital market has become one of the new research direction of accounting, however, the scholars studying abnormal phenomena in the capital market are much from finance and economics major. This paper thinks, abnormal phenomena in the capital market is due to the low effectiveness in Chinese capital market. The lack of effectiveness of the capital market is because of the lack of accounting information itself and the investors’ mistakes in using it, which lead to irrational market. Irrational trading in the securities market has weakened the effectiveness of the stock market. Through empirical research method we proves that firm size, book to market ratio, accounting earnings, unexpected earnings, accounting factors and abnormal stock returns have strong correlation with the stock premium. The behavioral finance factor-investors’sentiment also affects the abnormal return of stock. Because of the abnormal returns investors did not pay attention to these factors, there is a low effective capital market; and once investors pay attention to these factors, they must take a certain mode to obtain excess returns; and many investors’ chasing profit will lead to the stock price being close to its value and the effectiveness of capital market. The value of this paper is to provide a way for investors to speculate; on the other hand, tends to promote the price of securities to their value, improving the effectiveness of the capital market.