Asset Pricing Effect Of The Financial Sector Based On The Cross-section Of Expected Returns

The studies about the assert prices is always the core question of the current finance field.Over sixty years ago,there had been the significant model to resolve this problem,which is the Capital Assert Prices Model.In 1993,Fama and French proposed the classical three-factor model,which has been recognized by many empirical results in a large number of countries.Since economy has been developing so fast,we come to realized that the importance of lending.However,lots of scholars are always focus on the single leverage of one company,studying how the leverage has impact on its profit.Under the enlightenment of foreign literature,I believe the leverage of finance is important,and devote much time to study the link between finance leverage and assert prices.This article aims to study assert pricing effect of financial sector's leverage.Firstly,it proves theoretically that our financial intermediaries affect economic development and introduce the financial leverage briefly.Than analyzes the importance of financial leverage to financial organization and demonstrate the relationship between financial sector's leverage and the economic development empirically.Select variate,make models and examine the impact that financial sector's leverage has on stock portfolio returns empirically.Use all A-share quarterly data from 2005 to 2014 to build stock portfolios.The main measure is using Fama and MacBeth two-pass regressions to price the cross-section of these portfolios.At the same time,the influence of traditional asset pricing models such as CAMP model,three-factor model,the new two-factor modeland new three-factor model which include the leverage are compared.The results show that the average stock returns can be largely explained by their covariance with shocks to the aggregate leverage of financial sectors.Our single-leverage model have strong explanation.The new two-factor model outperforms well when campares with CAMP model and the new three-factor model also outperforms well when campares with traditional three-factor model.The leverage of financial sector's can improve the explaination of the average stock returns.