An Empirical Analysis On The Influence Factors Of Chinese A-share Market's Stock Returns

Investment portfolio theory,capital asset pricing model,option pricing model and other asset pricing theory to study the value of assets in the future under uncertain conditions.However,domestic and foreign scholars generally believe that the United States as the representative of the developed financial market has fundamentals of information,trading behavior,historical performance,calendar effects and other aspects of financial anomalies.In recent years,foreign scholars have done more research on the impact of profitability and investment of company on the stock returns to improve the stock pricing mechanism.The representative pricing model is the five-factor model in which Fama-French adds the profitability factor RMW and the investment factor CMA on the basis of its original three-factor model.At present,the market system design of China's securities market is distinctively,the transaction structure is unreasonable,and the ability of the market to hedge risks is insufficient.Second,market participants are mainly retail investors and are more vulnerable to the irrational behavior of information,thus affecting the efficiency of the whole market.Based on the above points,this paper focuses on the law of pricing the stock returns in China from five aspects:market risk,negotiable market cap,book value ratio,profitability and investment level.At the end of this paper,the impact of liquidity on yield is discussed briefly.This paper chooses the transaction data of the whole A-share market from July 1997 to December 2016,and the financial data of the A-share market as the sample to study the Fama-French five-factor model in the A-share market.First tests the model using small market stocks,big market stocks,the total sample(according to the median market value of the stock)and the plate market sample data(main board market,SME Board and GEM board)with the help of Fama-Macbeth two-step respectively to realize explanatory ability of the negotiable market cap,book value ratio,profitability indicators(operating profit/equity book value),and the growth rate of total assets in the independent and joint cross sectional differences for individual stocks for difference in yield independently and jointly.Do the regression analysis of the yield of each stock combination at each point in accordance with the different grouping method(5×5?2×4×4)and the factors with three different grouping method(2×3,2×2,2×2×2×2),meanwhile,verify the robustness of the model.Finally,analyze explanatory ability of six factor model including turnover factor TUMD.Through the empirical analysis,it is concluded that the Fama-French five-factor model has better explanatory ability to stock returns than the three-factor model.In the construction of three 25(5x5)LHS portfolios and three of the 32(2x4x4)LHS portfolios,the part that the three-factor model cannot explain is explained by the model after the addition of RMW and CMA.Due to the high correlation between different versions of the same kind of factor,different versions do similar to the factor regression analysis,so the choice between them has little effect on the application of the model.In Fama-French(2015),the book market value ratio factor HML is a "redundancy factor",but in China's A-share market,HML is not a"redundancy factor".Through five factor model in 32 LHS(2×4×4)portfolio performance,five factor model in large capitalization stocks portfolio performance is superior to it in the small market value stock portfolio performance,it may be that the relatively stable market value of company development,value stocks accounted for high,makes the empirical analysis results more close to the theoretical analysis.However,small-cap market capitalization is more serious in concept and subject matter,making the empirical results inconsistent with theoretical analysis in the individual portfolio.In this paper,the empirical test of six LHS portfolio,Fama-French five factor model in explaining despite low profitability but high levels of small capitalization stocks combination investment when the average returns of poor performance,this model can not explain this kind of portfolio of stock returns vision.After adding the liquidity factor TUMD,the interpretation ability of the model improved.