Empirical Study Of "small Firm Effect" On Chinese A-share Market

"Small firm effect" is one of the financial anomalies that exist in the stock market. It refers that on the stock market, the smaller the size of the company's stock is, the higher profit it can makes. 1981, Banz proposed the existence of "small firm effect" on the US stock market. After this, many scholars put a lot of enthusiasm into the study of "small firm effect" and have made a series of research results. Currently, the study of "small firm effect" has matured at abroad. In China, there are also many scholars researched the "small firm effect" on China's stock market. Overall, although a lot of achievements have been made, the researchers of "small firm effect" on China's stock market have yet to be perfected. Specifically, the domestic studies on the "small company effect", which can result in significant impact are mostly in the period during the establishment of China's stock market to 2006. However, in this period, China's stock market is still immature. As China's stock market developing and improving continuously, whether the “Small firm effect "in China's stock market performance is also changed, we still do not know. For this reason, this thesis aims to conduct a systematic study on China's stock market to exam the "small firm effect" on China's stock market. On the basis of summarizes the current research, this thesis conducts a more comprehensive empirical research on "small firm effect" from the angles such as the Shanghai and Shenzhen, company size, study the frequency, the stock cycle, the restructuring of China's stock market shares respectively. Through research, we find that during 2011-2013, the Shanghai stock market has "big company effect" and a "medium-sized firm effect" after risk adjustment while Shenzhen stock market has “Small firm effect”. However, the “Small firm effect” on Shenzhen stock market is not statistically significant. Finally, this thesis summarizes the "small firm effect" empirical research and then explains the reasons for the existence of a small firm effect on the basis of the analysis of the previous studies and the actual situation of China's stock market. In the end, we make some investment advice for the investors on China's stock market.