The Research On Fama-French Three-factor Model Of China's Growth Enterprise Market

Financial asset pricing is not only the focus of financial theory research,but also has been closely watched by the practical community.In the development of asset pricing theory,the classical Fama-French three-factor model suggests that the change of stock returns can be explained by three factors: market risk,scale and book market value.The model has been widely recognized since its inception.Related research on domestic stock market has also been more accumulation,but the research results of three factor model about the GEM market are not rich enough,especially since China's economy enters the new normal development period,the strategic significance of scientific and technological innovation and industrial structure changes is highlighted.The GEM market in the new historical period should play a more important role.In this context,whether the three-factor model in China's GEM is applicable,is still a question worthy of further study.In the past two years,domestic scholars have found that the FF five-factor model is not as good as the three-factor model for China's stock market.In this paper,the three-factor model is used to analyze the GEM market,selecting the China's GEM stocks during 2010-2016 as the object of study.Based on the FF three-factor model,this paper combines stock portfolio and individuals to carry out the empirical analysis of applicability.Furtherly,Based on the selection of different sample length,discuss how does the applicability of the three factor model in the GEM market changes with the continuous development of the GEM? Finally,from the perspective of financial practice,this paper discusses investment strategy on the GEM market based the three-factor model,including the basic ideas to construct ? strategy and ? strategy.The main findings of this paper are as follows:(1)The FF three-factor model has a strong explanatory power for China's GEM market and is superior to the CAPM model.The analysis of all samples and sub-periods both supports this conclusion;(2)Among the three factors,there is a significant difference on the explanatory power of the book market value between the large-cap stocks and the small-cap stocks.This factor is more suitable for explaining the volatility of the small-cap stocks,but it is not applicable to the explanation of the large-cap stocks.The reason for this result is worthy of further study;(3)With the passage of time,the applicability of the three-factor model in China's GEM is increasing,the side shows that China's GEM market is developing and improving.Compared with the results of different sample studies,the three-factor model in China's GEM shows the trend that longer-term data is more applicable than short-term data;(4)The FF three-factor model cannot fully explain the changes in GEM stock returns: according to the empirical study of the FF three-factor model and CAPM model,constant items of the model are significantly not equal to zero,indicating that in addition to the three factors involved in the three factors,there are still other variables that have not been found.