Study On The Idiosyncratic Volatility And Cross Sectional Return Of Equity In China's Growth Enterprise Market

The core of the theory of finance is the relationship between risk and profit.The classical asset pricing model holds that the capital market is effective.The factors that affect the equilibrium price of the asset are only systemic risk and the system risk of the portfolio is measured by the Beta coefficient.The higher the value of the stock should get higher yields and that the company's non-systematic risk(idiosyncratic risk)can be dispersed through a fully diversified portfolio,which is positively related to systemic risk,independent of the company's idiosyncratic risk,So only the market risk requires risk compensation.However,many studies have found that the stock market is not effective in recent years.Because of the incomplete information,the shortage of short selling mechanism and the shortage of funds,investors can not completely disperse the idiosyncratic risk by constructing the investment portfolio.Therefore,the need for risk compensation and the relationship between it and the benefits of financial research has become a hot spot.Based on the data of China's GEM market from June 2010 to March 2017,the Fama-French three-factor model and the five-factor model were used to measure the volatility of the stock market of China's GEM.Use the combination analysis and Fama-Macbeth cross section regression analysis method to study the impact of idiosyncratic volatility on stock returns.The results show that:(1)Whether using the three-factor model to measure the idiosyncratic volatility or using the five-factor model to measure idiosyncratic volatility,idiosyncratic volatility is positively correlated with the cross-sectional profit.(2)In controlling the firm's size,the book value ratio,Capacity,investment variables,turnover and leverage ratio variables and other indicators,this positive correlation is still significant.Indicating that the positive correlation between the two can not be explained by these control variables.(3)There is a negative correlation between the firm's size and the stock return.The book value of the company is positively correlated with the stock return,which means that the profitability of the company is positively related to the stock return.The performance of the small company is higher than that of the large company,and strong profitability of the company's performance is higher than the profitability of weak corporate stocks,but that the company's investment model variables are not significant.At the same time,this paper puts forward some problems which still exist in China's GEM,and puts forward relevant suggestions.