Stock Yield Industry Comparative Analysis Based On The Approximate Factor Model

In this paper, we utilize the approximate factor model to analysis the linkage effect of industry stock returns. First, we deduct the cumulative contribution rate of the approximate factor model when both the number of variables (N) is more than number of observations (T) and the number of variables(N) is less than number of observations (T). Then, we evaluate the linkage effects of the industry internal stock return rate with the help of the cumulative contribution rate and KMO test statistic index. Besides, the common index reflects the influence by the common factors in the industry stocks, which is the influence of industry level. According to the data of Shanghai Stock Exchange A shares, from April2008to December2014, we do the empirical analysis. In the Shanghai A shares, there are obvious linkage effects of eight industries. Furthermore, this linkage effects can be divided into three levels according to the strength of the linkage effects from strong to weak. In the first level, there are financial industry, construction industry and information transmission, software and information technology services industry. In the second level, there are electricity, heat, gas and water supply industry, wholesale and retail trade, transportation, storage and postal industry and real estate industry. In the third level, there is only manufacturing industry. Through analyzing the communality of the industry internal stocks, we conclude that, in the first level, there are more than80%stocks’ influence by common factors are high. Oppositely, in the third level, there is only20.4%stocks like this is. Specially, the value of communality in Shuangqian stock is less than0.5, which indicate that the company stock return rate is more affected by its own factor. Finally, we give suggestions with the analyzing and conclusions above.